# Games Workshop Group report highest level of sales since flotation 29 years ago

- Link: https://www.directorstalkinterviews.com/games-workshop-group-report-highest-level-of-sales-since-flotation-29-years-ago/4121124244
- Published: 2023-07-25T07:49:24+01:00
- Author: Emily Johnson

**Games Workshop Group PLC** (LON:GAW) has announced its annual report for the 52
week period to 28 May 2023.

**Highlights**

| ** ** | ** ** | ** ** | ** ** | **52 week period to****28 May 2023** | 52 week period to29 May 2022 | 
|  | ** ** | **£m** | £m | 
| Core revenue | ** ** | **445.4** | 386.8 | 
| Licensing revenue | ** ** | **25.4** | 28.0 | 
| Revenue | ** ** | **470.8** | 414.8 | 
| Revenue at constant currency | ** ** | **447.3** | 414.8 | 
| Core operating profit | ** ** | **148.2** | 131.7 | 
| Core operating profit at constant currency | ** ** | **131.9** | 131.7 | 
| Licensing operating profit | ** ** | **22.0** | 25.4 | 
| Licensing operating at constant currency | ** ** | **19.9** | 25.4 | 
| Operating profit | ** ** | **170.2** | 157.1 | 
| Profit before taxation | ** ** | **170.6** | 156.5 | 
| Net increase in cash – pre-dividends paid | ** ** | **155.5** | 79.3 | 
|  | ** ** | ** ** |  | 
| Earnings per share | ** ** | **409.7p** | 391.3p | 
| Dividends per share declared in the period | ** ** | **415p** | 235p | 
| Dividends per share paid in the period | ** ** | **415p** | 285p |

> Kevin Rountree, CEO of Games Workshop said:
> “We finished the year having delivered eight consecutive years of Group sales 
> and profit growth – in the period we reported the highest level of sales and the
> most profit we have generated since flotation 29 years ago. Our international 
> team has been sensational again, thanks to you all.” 

**STRATEGIC REPORT

**Strategy and objectives**

Games Workshop is committed to the continuous development of our intellectual property(‘
IP’) and making the Warhammer hobby and our business ever better.

Our ambitions remain clear: to make the best fantasy miniatures in the world, to
engage and inspire our customers, and to sell our products globally at a profit.
We intend to do this forever. Our decisions are focused on long-term success, not
short-term gains.

Let me go through our strategy part-by-part:

The first element is that we make high quality miniatures. We understand that what
we make may not appeal to everyone, so to recruit and retain customers we are absolutely
focused on making our models the best in the world. In order to continue to do that
forever and to deliver a decent return to our owners, we sell our miniatures for
a price that we believe represents the investment in their quality.

The second element is that we make fantasy miniatures based in our endless, imaginary
worlds. This gives us control over the imagery and styles we use, and ownership 
of the IP. Aside from our core business, we are constantly looking to grow our licensing
income from opportunities to use our IP in other markets.

The third element is that we are customer focused. We aim to communicate in an open,
fun way. Whoever and wherever our customers are, and in whichever way they want 
to engage with Warhammer, we will do our utmost to support them.

The fourth element is the global nature of our business. Our customers can be found
anywhere, and we seek them out all over the world. They’re a passionate bunch with
an interest in science fiction and fantasy. They’re collectors, painters, model 
builders, gamers, book lovers and much more. And while no two customers engage with
Warhammer in exactly the same way, they’re all deeply invested in the rich characters
and settings of our IP.

To reach them, we have two key tools: our retail chain and our digital content. 
In retail, we showcase the Warhammer hobby and offer a fantastic customer experience.
Our digital offering has never been richer. Through warhammer-community.com and 
social media we reach thousands of people every day, showing them the very best 
aspects of the Warhammer hobby and inviting them to join our global community of
enthusiastic fans.

Our retail channel is supported by our own online store (it has the full range of
our products) and our independent stockist and trade accounts across the world. 
These independent accounts do a great job supporting our customers in parts of the
world where we either have not yet opened one of our stores or where it is not commercially
viable for us to have one. Our long-term goal is to have all three channels (retail,
trade and online) growing in harmony. We will always have more independent accounts
than our own stores. Our strategy is to grow our business through geographic spread,
growing all of the three complementary channels.

The fifth element is being focused on cash. 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 products. 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. Our dedication and focus should ensure we deliver on time and
within our agreed cash limits.

We measure our long-term success by seeking a high return on investment. In the 
short term, we measure our success on our ability to grow sales whilst maintaining
our core operating profit margin at current levels. The way we go about implementing
this strategy is to recruit the best staff we can. We look for those with the appropriate
attitude and behaviour a given job requires and for those who are aligned with our
principles and who are quality obsessed. It is also important that everyone we employ
has a real desire to learn the skills needed to do their job and has a great attitude
towards change. To support them, we offer all of our staff both personal development
and skills training.

Our brands

We have originated and are in control of a number of strong, globally recognised
brands with their own identities, associations and logos.

Our key consumer facing brand is ‘Warhammer’ – this unites all aspects of the Warhammer
hobby – collecting, building, painting, playing, reading, watching, gaming, etc.
in the worlds of Warhammer.

We have two main universes/settings – our dark, gritty fantasy sci-fi universe, 
which encompasses ‘Warhammer 40,000’, ‘Warhammer The Horus Heresy’ and ‘Necromunda’
and our unique fantasy setting that includes ‘Warhammer Age of Sigmar’, ‘Blood Bowl’(
albeit a tongue in cheek parody) and, the soon to be released, ‘Warhammer The Old
World’. We believe our IP to be among the best in the world.

We continue to add to the depth of these worlds with an ever evolving range of miniatures
that we hope will keep hobbyists engaged and excited for a lifetime.

The Warhammer settings are incredibly rich and evocative backdrops. They’re populated
by more than three decades of fantastical characters and comprise thousands of exciting
narratives. We are committed to making it easier than ever for people to discover,
engage with and immerse themselves in our IP. Aided by a small, senior team we have
already begun to find new partners, and new ways to help us bring the worlds of 
Warhammer to life like never before. Together, we’ll continue to explore animation,
live action, video games and more. We’ll present the very best aspects of our rich
IP, delighting audiences while always ensuring we do no harm to our core miniatures
business.

Business model and structure

We are a vertically integrated business. We design, manufacture, distribute and 
sell our fantasy miniatures and related products. These are fantasy miniatures from
our own Warhammer 40,000 and Warhammer Age of Sigmar universes. We are an international
business centrally run from our HQ in Nottingham, with 78% of our sales coming from
outside the UK. We have our two main factories, a paint factory, two warehouse facilities,
design studios and back office support functions – all are based in or near Nottingham.

Design

We design all of our products at our HQ in Nottingham. Employing c.300 people, the
design studio creates all the IP and all the associated miniatures, artwork, games
and publications that we sell. Annually, these specialist staff produce hundreds
of new sculpts, illustrations, rules, stories etc. enabling us to deliver new products
every week and continue to keep our customers engaged and excited. In 2022/23 we
invested £17.3 million in the studio (including software costs) with a further £
6.7 million spent on tooling, the majority of which was for new plastic miniatures.
We are committed to investing in these areas at an appropriate level every year.

All of our plastic miniatures are branded as Citadel Miniatures, a mark with an 
unparalleled reputation for quality. It denotes both a style and level of detail
that we apply to both our own worlds (Warhammer 40,000, Warhammer Age of Sigmar 
etc.) and those of others, e.g. Lord of the Rings. Our resin miniatures, designed
for more experienced customers, are branded as Forge World and are less widely available
than their plastic counterparts.

Many customers love personalising their miniatures and our Citadel Colour paint 
range, brushes and accompanying painting system are designed to help everyone from
the complete beginner to the most experienced painters in the world achieve great
results. In the pursuit of ever better, we continually develop new types of paint
and ways of using them. The result – our paints are used the world over. And for
painting more than just our miniatures.

When not interacting with our miniatures, many customers enjoy reading stories set
in our rich and immersive worlds. Under our Black Library imprint we publish new
titles every year, from short stories and audio dramas through to full length novels
and audio books. These we make available in physical bookstores, third party digital
platforms and through our own retail and other specialist stores.

Manufacture

We are proud to manufacture our product in Nottingham which is the centre of expertise
for our global business. It’s where we started and where we intend to stay.

Logistics

Our product is distributed from our main warehouse at our HQ (Eurohub) or our warehouse(
EMG) approximately 25 minutes away. These warehouses supply our two hubs; one in
Memphis, Tennessee and one in Sydney, Australia. Between these four warehouses, 
we are able to directly supply our independent retailers, our own retail stores 
and fulfil our online orders.

Sell

Our core revenue is generated via three channels, our own stores ‘Retail’, third
party independent retailers ‘Trade’ and our online store ‘Online’. We also sell 
via our licensing partners. We support these channels and activities via our digital
and marketing team.

Retail – our stores provide the focus for the Warhammer hobby in their geographical
areas. Our stores only stock Games Workshop product. They are where we recruit the
majority of our new customers. To do so, the stores don’t offer the full range of
our product, only starter sets, new release products and the appropriate extended
range. At the period end, we had 526 of our own retail stores in 23 countries. We
have 399 single staff stores: small sites, each one operated by only one store manager.
We also have 127 multi-staff stores, which, like our single staff stores, are constantly
reviewed to ensure they remain profitable. If not, they will probably be converted
to single staff stores.

Trade – we sell to third party retailers under closely controlled terms and conditions.
Independent retailers are an integral part of our business model helping us to sell
our products around the world and importantly in areas where we don’t have our own
stores. Games Workshop strives to support those outlets which help to build the 
Warhammer hobby community in their local areas. The bulk of our sales to independent
retailers are made via our telesales teams based in Memphis, Nottingham and Barcelona.
We also have small telesales teams in Sydney, Tokyo, Shanghai, Singapore, Hong Kong
and Kuala Lumpur. In 2022/23 we had 6,500 independent retailers (2022: 6,200) in
71 countries. We strive to deliver excellent service, operating in 20 languages 
covering all time zones. Independent retailers sell from their physical stores as
well as their own online web stores.

Online – sales via our own web stores. All of our retail stores also have a web 
store terminal that allows our customers to access the full range from within the
store. Our web stores are run centrally from our HQ.

Licensing – we grant licences to a number of carefully chosen partners. This allows
us to exploit our IP to broaden the presence and brand exposure of Warhammer around
the world, often entering new markets such as media and entertainment. It also allows
us to generate additional income. Currently, the majority of this income is generated
by video games sales in North America, the UK and Continental Europe.

Marketing – keep us customer focused. This team acts as the bridge between our other
business areas, ensuring we have a joined up approach between product (design to
manufacture) and sales. Marketing spend a lot of time listening and developing a
two way dialogue with our customers to make sure we keep their needs at the forefront,
championing the Warhammer hobby around the globe and injecting our content and communications
with a real sense of passion and fun.

Structure

We control the business centrally from our HQ in Nottingham; it is where the majority
of people with experience and knowledge of running our business work. I have put
in place a flat structure: the people with senior responsibility, that make all 
of the big decisions, report directly to me. There were a few changes during the
year to help us deliver our operational plans.

I implemented a new structure during the year which is split into two main teams:
an operational board team and a senior management team. The operational board members
are: the chief financial officer, a global IP and product design director, a global
business to business (B2B) sales and marketing director, a global manufacturing 
and supply chain director, and a creative media director. I represent our own sales
channels at the regular reviews.

Our global IP and product design director is responsible for our Warhammer design
studios (miniatures, books and box games, specialist systems, hobby product, our
publishing business – Black Library, and creative approvals for third party licences).
They ensure any content that is produced, whether physical or virtual, truly represents
our IP. They also support me in exploiting our IP, alongside our creative media 
director.

The responsibility for our trade sales is with our global B2B sales and marketing
director who also manages the marketing team for all sales channels.

Reporting directly to me, our retail chain is split between two retail territory
managers, one for North America and Asia and one for the rest of the world. Our 
online store (our biggest store) is the responsibility of our rest of the world 
retail manager, who also manages our biggest physical store, Warhammer World.

The global manufacturing and supply chain director manages the three factories in
Nottingham and our four main warehouse facilities in Nottingham, Memphis and Sydney
as well as a merchandising team to support the sales channels.

Our operations and support structure includes the chief financial officer for Games
Workshop who is responsible for accounts, HR, legal and compliance, and IT. They
also support me in exploiting our IP by managing the licensing team.

The senior management team comprises the members of the operational board together
with our global head of IT, two retail territory heads, our Group company secretary/
general counsel, two HR managers (covering support and advisory, and recruitment
and development). In addition, my executive assistant helps me by running a team
who support the day to day running of the teams above.

Key performance indicators

The boards and management team use a number of key performance indicators to provide
a consistent method of analysing performance, in addition to allowing the boards
to benchmark performance against our forecast. The key performance indicators utilised
by the boards can be split into key financial performance indicators and key non-
financial performance indicators.

Our key financial performance indicators are:

Monthly and year to date core business sales growth by channel

This measures the core business sales growth achieved in each of our core channels
on a monthly and year to date basis.

Monthly and year to date core gross margin

This measures the core gross margin achieved on core sales after taking account 
of the direct costs, depreciation of manufacturing equipment and the costs of shipping
our product to customers/stores on a monthly and year to date basis.

Year to date core operating profit percentage

The ratio of core operating profit against core revenue, as a percentage. This is
considered to be a measure which reflects sales and costs under our direct control.

Monthly and year to date core operating profit

This measures gross profit less operating expenses for the core business on a monthly
and year to date basis. This is considered to be a measure which reflects sales 
and costs under our direct control.

Year to date licensing revenue

This measures licensing revenue and cash earned from licensing. These measures reflect
revenue which is not under our control.

Our key non-financial performance indicators are:

Number of own stores by territory

This measures the number of our own stores which is an indicator of our global reach.

Number of ordering stockist accounts by territory

This measures the number of trade outlets that have ordered from us in the last 
six months. It is an indicator of our global reach and the health of our trade account
base.

Customer engagement

We measure this through our owned content channel Warhammer-community.com and reach
delivered through our social platforms.

Shareholder value

We believe shareholder value is created, primarily, by not destroying it. We have
no intention to acquire other companies, nor to dispose of any of those we own.

We return our surplus cash to our owners and try to do so in ever increasing amounts.
A ‘working cash buffer’ of three months’ worth of working capital requirement has
been set aside alongside six months’ worth of future tax payments before deciding
how much cash is truly surplus for the purpose of declaring dividends.

**Review of the period**

Another record year for Games Workshop – the business and the Warhammer hobby are
in great shape.

It has been another exciting year. After a relatively slow start for us, we finally
got into our rhythm and have delivered profitable sales growth in all of our three
channels, and in all major countries (excluding Russia, where we stopped selling
in March 2022). It was great to see the team effort in the second half focused on
executing our operational plan rather than allowing ourselves, at times, to get 
distracted by external events out of our control. There were lots of details to 
get right everywhere and, as always, the global team has delivered again. We have
controlled our costs well and improved our gross profit and as a result our cash
flow has been great; allowing us to return £136.5 million to our owners during the
period. Our staff have once again been amazing; thank you and well done to you all.

Our operational plan is designed to give us the best chance to succeed every month
so it was rewarding to see us finish the period with seven months of consecutive
Group core revenue growth against the prior period. Core revenue growth for the 
period at constant currency finished Retail +16.9%, Trade +9.3% and Online +3.0%.

We have been focused on recruiting new customers, improving our customer service
and at the same time aligning our stock forecasting and delivery to our ambitious
operational plans: getting the right products to the right locations at the right
time. Easy to say but by its very nature forecasting (trying to predict the future)
is an impossible task to actually get right. We have been investing in factory and
warehouse capacity and our new facilities are starting to go live. We are now improving
our end to end processes and our communications about our product ranges with our
customers, retail store managers, trade teams and customer service teams. Our new
forecasting team still have some hard work to do; we don’t want to underestimate
demand but too much cash tied up in stock is not great either.

We also take an ambitious approach to aligning ourselves with broader stakeholders’
opinions on how we run Games Workshop. We have, in the period reported, continued
our focus on environmental, social and governance (ESG) areas. The board, operational
board and our senior managers carried out a thorough review of our carbon footprint
which was supported by third party specialists. In summary, we have committed to
significantly reducing our scope 1 and 2 emissions over the next 10 years. We have
a detailed plan and so we believe it is achievable.

Morale at Games Workshop is upbeat: we are doing OK but inflation and the related
higher interest rates are clearly an ongoing concern for most of our staff. During
the period, we continued to look at relevant ways to support our staff. We have 
increased pay across the Group by on average 4.9% (supporting fully the increase
in UK national living wage to £11 per hour) and following a review of our family
leave entitlement, our maternity and adoption leave entitlement has increased from
6 weeks to 18 weeks at full pay. Paternity leave will increase from 1 to 2 weeks
at full pay. We will continue to keep staff benefits under review.

In line with our Group Profit Share Scheme, and for their outstanding contribution
to these results, we have paid each member of staff £4,000 this period (2022: £3,500),
in total £11.6 million (2022: £9.9 million).

**Design**

Following the successful relaunch of Warhammer The Horus Heresy in June 2022, we
have released a steady flow of new plastic miniatures, for what was originally a
resin only range, allowing ever more trade accounts and hobbyists to access this
part of the Warhammer hobby. February saw the release of the novel ‘The End and 
the Death’, the first part of the climactic finish to the legendary storyline behind
this miniatures range which began in 2006 and over 60 novels ago!

The second half of the year also saw some fantastic new miniatures and a dramatic
storyline leading into the new (10th) edition of Warhammer 40,000, released in June
2023. Fair to say that excitement for the new edition is high.

Often in the shadow of Warhammer 40,000, Warhammer Age of Sigmar continues to grow
steadily with launches in the period for Seraphon, Slaves to Darkness and the wonderfully
named Gloomspite Gitz, all being well received.

In December we released ‘The Battle of Osgiliath’, a box set based on one of the
seminal scenes from our licensor’s ‘The Lord of The Rings’ movies. While a modest
part of our business, it’s great to see it still going strong, 22 years since its
first release.

We continue to scour the world for those individuals who want to be part of making
the best fantasy miniatures in the world and this year we welcomed several designers
from South America. I’m always amazed that people are prepared to move to the other
side of the world to be part of what we do. The Warhammer hobby truly is something
special.

On a sad note, we made the hard decision to make our Russian language translation
team redundant. We held off as long as we could but with the war in Ukraine sadly
showing no signs of ending, we had to accept the reality that we won’t be in a position
to provide hobbyists in Russia with the offer we want, any time soon. We wish all
the individuals well and our thoughts go out to those impacted by the horrendous
events in Ukraine.

**Manufacturing**

Our manufacturing team has remained focused, as always, on producing the best fantasy
miniatures in the world. They have retained a default 24/5 shift pattern keeping
our overtime to a minimum and voluntarily working weekend shifts, but only as required.

All three Nottingham factories have operated in line with our forecast and expectations
throughout the year. We decided not to expand our manufacturing footprint further
during the year, instead focusing our energy upon improving our capabilities and
efficiencies using the world class equipment and people we have. A range of projects
have been progressed focusing on material efficiency as well as tool design and 
machining. These projects will allow us, in the future, to produce more with less.
We have also completed a suite of refurbishments to upgrade our facilities for staff.

Work towards obtaining a China Compulsory Certificate (CCC) was completed as expected.
Our factories successfully passed follow up audits and we now have all relevant 
core products accredited for sale across China.

The land in Nottingham, purchased in 2020, has been partially developed with the
building of an injection moulding tool storage unit and the creation of c.100 car
parking spaces. We continue to plan ahead and are ready to build an additional manufacturing
facility on this land when it is required. We currently have spare capacity.

Production staff costs decreased in the period as we reduced our use of temporary
agency staff, with costs decreasing by £1.6 million to £10.4 million, reducing to
2.3% of core revenue.

**Warehousing**

Having overcome significant technical challenges in late 2022, the warehouses in
Nottingham and Memphis ended the financial period running more efficiently. The 
priority for both of these sites going forward is to leverage the new equipment 
and systems, to reduce operating costs and maintain customer dispatch times. Cross
border shipping remains the key issue for orders into Europe. We continue to review
and consider practical and financially viable solutions to tackle this where possible–
this could involve setting up a warehouse facility in Europe.

North America

Whilst new systems and automation have been in place all year, it has not been until
later in 2022/23 that software updates and modest improvements to our old back office
systems allowed the team to use them fully. During the 2023/24 financial period,
we will decommission our legacy warehouse system and equipment. The back office 
systems will be replaced as part of an ongoing systems improvement plan.

UK

Finally, after a few teething problems, the EMG facility took on fulfilment of all
UK and European retail, trade and international shipping. Operations for all but
our UK and European online order fulfilment have now been running out of EMG for
a number of months with all relevant operational staff transitioned from our Lenton
site. Our Eurohub warehouse is being converted to become our dedicated materials
and component warehouse. The close proximity to the factories makes this the ideal
site to offer a more just-in-time service to our three factories. At the time of
writing, the component and material operation is transitioning from EMG to the Eurohub
component warehouse, this should be completed by the end of the summer. Online fulfilment
is making the reverse transition heading towards EMG. We are anticipating a few 
final teething issues.

Australia

With sustained sales growth in Australia, options to increase our warehousing capacity
are currently being explored. One option being considered is moving to a bigger 
leased site close to the existing location.

Total warehousing costs have increased by £5.6 million to £25.9 million, the majority
of the increase being across local authority rates (+£1.1 million), depreciation(
+£1.0 million), staff costs (+£1.2 million) and consumables costs (+£0.7 million);
as a percentage of core sales, warehouse costs have increased from 5.2% to 5.8%.

**Service centres **

As we grow there are just more things to process and join up. During the year our
teams delivered another herculean effort processing more transactions than ever.
We continue to invest in our IT team to deliver our systems improvement plan. It
is another important year ahead for this relatively new team. There are really too
many things to write about that our silent backbone does; the key highlights during
the year were ensuring the opening of the new Trade office in Barcelona happened
on time and within budget from both a people, finance and systems perspective as
well as ensuring the receipt of all of the outstanding VAT from the French tax authorities.
We thank them all for their considerable efforts and for their commitment to continuous
improvement.

**Customer focused**

Our goal remains to reach, engage and inspire Warhammer fans everywhere. We continue
to focus our efforts on six of our own key areas:

Our stores

For decades, the staff in our retail stores have worked cheerfully and relentlessly
to offer great customer service and more importantly recruit ever more new customers
into the Warhammer hobby. Our stores continue to be the best place to start your
hobby journey with us. We continue to offer free introductory experiences: receive
your first model, learn how to build and paint it, and play an exciting game with
store staff. Our Warhammer Alliance schools programme has an active c.6,000 schools
signed up. Designed to support young people improve their engineering, arts, and
maths skills, a Warhammer club is a great creative outlet that will easily fit into
any development offer for young people aged 12 and above. For older students (14
+) in the UK, we also have the Warhammer skills development programme that guides
them through the hobby and works towards achieving the Duke of Edinburgh’s Award.

Warhammer Community

Warhammer-community.com remains the cornerstone of our online presence. The best
place to come for all the latest news from the 41st Millennium and the Mortal Realms.
During the year, the team again put out thousands of pieces of content to engage,
inform and inspire Warhammer fans globally.

My Warhammer

This single login gives access to our webstores and related apps. As at the period
end, we have 427,000 active users. To better track engagement we have defined an
active user as someone who has engaged with us online in the last six months.

Warhammer+

Our subscription service for Warhammer fans is approaching its second year. It is
a new way to explore the worlds of Warhammer. You’ll find original animations and
shows, access to Warhammer 40,000 and Age of Sigmar apps, a digital vault archive
packed with decades of lore and magazines, subscriber offers, and exclusive miniatures.

The exciting content delivered through Warhammer+ will remain an integral part of
our digital offer and how we share our IP. Subscriber numbers are currently 136,000(
2022: 105,000).

Email

Our email campaigns continue to be one of our most effective methods of communication.
Subscriber numbers, defined as people who opened one of our emails in the last six
months, at the period end were 531,000 (2022: 455,000).

External events/social media

To broaden our reach to ever more potential enthusiasts, we continue to attend many
of the largest tabletop third party events in the world and post huge amounts of
content on our popular official social media sites. This included some of our best
animation ever; including news of the new edition of Warhammer 40,000, supported
by our latest trailer.

The network of local clubs, schools and group events, plus the activities of our
trading partners and our own 500+ stores, have helped local Warhammer communities
grow offline… in the real world.

**Licensing business**

Warhammer IP is rich, vast and endless so as we do more projects, it’s important
that we are focused on exploiting it all and that its representation continues to
be respectfully maintained. During the period we transferred the approval process
for managing our IP with licensing partners to the management team at the heart 
of Games Workshop, our Warhammer studios. This will ensure its representation stays
true to its origins.

Our strategy is to exploit the value of our IP beyond our core tabletop business,
in multiple categories and markets globally. We intend to ensure Warhammer’s place
as one of the top fantasy IPs globally. The main areas of focus are:

Entertainment

Our contract negotiations with Amazon Studios continue, so within normal legal constraints
we have nothing more we can add and we will update you accordingly.

Video games

During the period our licensing partners launched five new games; four PC/console
and one mobile. We also saw revenue from established games that continued to perform
well, many years after launch, through a mixture of added content and continued 
marketing. Particular launches of note were Darktide, Boltgun and Tacticus.

Two new games were announced in the period including a major PC and console strategy
game, Realms of Ruin and a combat racing game, Speed Freeks.

New games launching in 2023/24 include major titles – Realms of Ruin and Space Marine
2. There are also the computer role playing game Rogue Trader and digital collective
card game Warpforge with unannounced release dates. In total there are nine unreleased
games in development and two new licences were signed in the year.

As a reminder, the viability and ongoing success of any of our licensing deals is
broadly out of our control; they are reliant on the successful development and delivery
by our licensing partners.

**Sales**

Reported core revenue grew by 15.1% to £445.4 million for the period. On a constant
currency basis, core sales were up by 9.6% from £386.8 million to £424.0 million.

Licensing revenue from royalty income was down slightly in the period at £25.4 million(
2022: £28.0 million). This was largely due to a high level of guarantee income on
multi-year contracts signed in the previous period; this income is recognised in
full at the inception of the contract in line with IFRS 15 ‘Revenue from contracts
with customers’ following assessment of the performance obligations of the contract.
Reported income is split as follows: 68% PC and console games, 6% mobile and 26%
other. In the period, guarantee income was £8.1 million (2022: £15.0 million). Cash
received from licensees in the period was £26.5 million (2022: £15.4 million).

**Revenue by sales channel**

|  | **52 weeks ended****28 May 2023** | 52 weeks ended29 May 2022 | **52 weeks ended****28 May 2023** | 52 weeks ended29 May 2022 |  **2023** |  2022 | 
|  | **Constant currency****£m** | Constant currency£m | **Actual rates****£m** | Actual rates£m | **% of core ****revenue** | % of core revenue | 
| Trade | **234.2** | 214.3 | **248.0** | 214.3 | **56%** | 55% | 
| Retail | **101.9** | 87.2 | **106.4** | 87.2 | **24%** | 23% | 
| Online | **87.9** | 85.3 | **91.0** | 85.3 | **20%** | 22% | 
| **Core revenue** | **424.0** | 386.8 | **445.4** | 386.8 |  |  | 
| Licensing revenue | **23.3** | 28.0 | **25.4** | 28.0 |  |  | 
| **Revenue** | **447.3** | 414.8 | **470.8** | 414.8 |  |  |

_Trade_

Trade achieved significant growth of 15.7% with growth in all key countries. In 
the period, our net number of trade outlets increased by c.300 accounts to 6,500
which helped drive forward sales in this channel. It’s worth noting that a large
number of independent retailers now also sell our products online, meaning our customers
have more choice than ever about where to buy Warhammer. During the year we set 
up a sales office in Barcelona for trade sales into Europe. This was to help mitigate
staff recruitment gaps in Nottingham, particularly in relation to language skills.

_Retail_

We believe our stores are the best place to start your Warhammer hobby journey with
us. Our stores are filled with staff who have extensive Warhammer knowledge, build
local communities, and offer Warhammer hobby guidance and support. It is an essential
and unique customer service offer that we are proud of. In the period, Retail achieved
growth of 22.0%.

Store openings and closures during the period:

|  | Number of storesat 29 May 2022 |  Opened |  Closed | **Number of stores****at 28 May 2023** | **Number of single staff****stores at 28 May 2023** | Number of single staffstores at 29 May 2022 | 
| UK | 135 | – | – | **135** | **90** | 93 | 
| North America | 165 | 8 | 1 | **172** | **145** | 145 | 
| Continental Europe | 151 | 5 | 2 | **154** | **113** | 111 | 
| Australia | 49 | 2 | 2 | **49** | **37** | 37 | 
| Asia | 18 | 1 | 3 | **16** | **14** | 14 | 
|  | 518 | 16 | 8 | **526** | **399** | 400 |

In the period, we opened, including relocations, 16 stores. After closing 8 stores,
our total number of stores at the end of the period was 526. The performance of 
each store will be kept under review and any stores that do not meet our financial
model will be closed.

Our first café store in Tokyo, which opened in December 2022, has started well and
has been recruiting new customers from day one. We are planning to open three additional
Warhammer stores in other cities across Japan in 2023/24.

Our new store openings will continue to follow our single staff model, where appropriate.
We will continue to review the format of our stores pragmatically e.g. we monitor
transaction count carefully and add temporary staff to support the store manager
when needed. Ensuring we always recruit great store managers and offer our customers
an exceptional in-store experience, remains a priority for us.

Online

Online sales increased by 6.7% compared to the same period last year. As noted above,
our customers have a lot of options when it comes to shopping for Warhammer online
and are able to buy our products both through our own web stores (reported in Online)
and through those of independent retailers (reported in Trade). To continue to be
fair to our 6,500 trade partners and to ensure our stock allocation is appropriate,
we don’t carry high quantities of new release products on our own online store –
so it will nearly always sell out. We are at the final stages of completing the 
first phase of upgrading our online store, putting it on a stable IT platform. This
project has been more complex than the original review, and to be honest, it has
not been delivered in our normal joined up team Games Workshop way. The team have
regrouped and it is being delivered now in phases, the go live date of phase 1 is
under review, currently scheduled for January 2024. 

**Core gross margin **

Core gross margin percentage declined in the period from 67.1% to 66.5%.

| Gross margin at May 2022 | 67.1% | 
| Inventory provision | +0.9% | 
| Production | +0.8% | 
| Materials | -0.6% | 
| Logistics | -0.7% | 
| Animation | -1.0% | 
| Gross margin at May 2023 | 66.5% |

Core gross margin has benefitted from a reduction in inventory provisions as well
as production efficiencies as we reduced the use of agency staff. These have been
offset by an increase in logistics costs, as our expanded warehouse facilities came
online, and we experienced higher carriage costs, mainly in the first half of the
year. Animation relates to the costs of producing the content for Warhammer+, the
amortisation of which is reported in cost of goods.

**Operating expenses**

Core operating expenses have increased by £20.3 million in the period (2023: 33.2%
of core revenue; 2022: 33.0%).

| Operating expenses at May 2022 | £127.7m | 
| Staff costs | +£8.4m | 
| Investments | +£3.2m | 
| Property costs | +£1.7m | 
| Profit share | +£1.6m | 
| Other | +£5.4m | 
| Operating expenses at May 2023 | £148.0m |

We have invested in our staff, increasing the levels of pay to our store staff and
investing in new roles and pay levels in our support services, as well as paying
all staff more Group Profit Share. The additional spend which we categorise as investments
is our ongoing development of the upcoming new web store and the setting up of a
new trade sales office in Barcelona. The increase in other costs is mainly due to
ongoing software support (+£0.9 million), travel (+£1.2 million), payment processing
charges (+£0.8 million) and marketing spend (+£1.1 million).

Licensing operating expenses have increased by £0.8 million due to a provision put
in place against a licensing receivable. In the year we also changed the structure
of the team. The team is now more focused on quality rather than quantity.

**Operating profit**

Core operating profit increased by £16.5 million to £148.2 million (2022: £131.7
million). As a percentage of core sales, core business operating profit was 33.3%(
2022: 34.0%). On a constant currency basis, core business operating profit increased
by £0.2 million to £131.9 million.

Licensing operating profit declined by £3.4 million to £22.0 million (2022: £25.4
million). On a constant currency basis, licensing operating profit declined by £
5.5 million to £19.9 million. These numbers are income less costs; they do not include
any costs related to using the IP created in the core business.

**Cash generation**

| Cash and cash equivalents at May 2022 | £71.4m | 
| Net cash from operating activities | +£231.7m | 
| Share issue | +£2.6m | 
| Other | +£1.0m | 
| Lease payments | -£12.7m | 
| Product development | -£13.1m | 
| Purchase of capital assets | -£15.2m | 
| Tax paid | -£39.0m | 
| Dividends paid | -£136.5m | 
| Cash and cash equivalents at May 2023 | £90.2m |

Included within net cash from operating activities are working capital movements
relating to a decrease in inventory purchases of

£6.0 million, a decrease in trade and other receivables of £8.1 million and an increase
of £4.2 million in trade and other payables.

**Dividends**

We followed our principle of returning truly surplus cash to shareholders. Dividends
of £136.5 million (2022: £77.1 million) were declared during the period. A ‘working
cash buffer’ of three months’ worth of working capital requirement alongside six
months’ worth of tax payments has been set aside before deciding how much cash is
truly surplus for the purpose of declaring dividends.

**Return on capital employed – core business**

A long-term measure of our performance has been return on capital employed (ROCE).
During the year our core business return on capital has increased from 118% to 133%.
If ROCE was calculated using the period end values, it would be 155% (2022: 113%).
Core average capital employed increased by £0.4 million to £111.7 million. Average
balances are calculated over the 12 month period.

**Investments in assets**

This is what we have been spending your money on:

|  |  | **2023****£m** | 2022£m | 
| Shop fits for new and existing stores |  | **1.3** | 1.3 | 
| Production equipment and tooling |  | **9.3** | 10.1 | 
| Computer equipment and software |  | **2.1** | 2.9 | 
| Site |  | **1.9** | 3.4 | 
| **Total capital additions** |  | **14.6** | 17.7 |

In 2022/23, we invested £6.7 million on moulding tools and £1.8 million in tooling,
milling, injection moulding and paint machines. The investment in computer equipment
and software includes £1.3 million on the upgrade of our EMG warehousing facility.
The investment in Site includes £0.7 million on EMG and several other projects at
our HQ in Nottingham.

**Inventories **

Inventories have decreased by £5.4 million. Inventory before inventory provisions
decreased by £8.2 million to £36.6 million (2022: £44.8 million). Inventory provisions,
at the period end, decreased to 9.8% of gross stock (2022: 14.3%). We continue to
offer a broad range of price points. Our average RRP increase on miniatures in the
period reported was 6% and an average of 3% across all other product lines.

**Trade and other receivables**

Trade and other receivables decreased by £9.1 million, which includes an £11.3 million
decrease in VAT receivable, due to the receipt of the outstanding European VAT balance,
and a £3.9 million decrease in royalty income receivable. This is partially offset
by a £1.2 million increase in trade account debtor balances, a £0.8 million increase
in digital income trade receivables and a £2.5 million increase in other receivables
relating to credit card receipts in transit.

**Trade and other payables**

Trade and other payables increased by £3.4 million, including a £2.2 million increase
in PAYE and other staff costs payable, and a

£1.9 million increase in VAT liabilities. This was offset by a £0.7 million decrease
in deferred income mainly relating to online sales.

**Taxation **

The effective tax rate for the period was 21.0% (2022: 18.0%). The rate is higher
than in the prior period as a result of the increase in the UK corporation tax rate.

**Treasury**

The objective of our treasury operation is the cost effective management of financial
risk. The treasury relationships are managed centrally and operate within a range
of board approved policies. No transactions of a speculative nature are permitted.
Credit risk on cash and short term deposits is mitigated as the counter-parties 
are banks with high credit ratings assigned by international credit agencies.

**Funding and liquidity risk**

The Group pays for its operations entirely from its cash flow. 

**Interest rate risk**

Interest income for the period was £1.3 million (2022: £0.2 million) and interest
expense was £0.9 million (2022: £0.8 million).

**Foreign exchange risk**

The sensitivity of the Group’s income statement to depreciation in foreign exchange
rates on US dollar and euro financial assets and liabilities are disclosed below.
An appreciation of the stated currencies would have an equal and opposite effect:

|  |  |  | Income statement losses | 
|  |  |  | 2023 | 
|  |  |  |  |  | £m |   | 
| 15% depreciation of the US dollar |  |  |  |  | 5.9 |   | 
| 15% depreciation of the euro |  |  |  |  | 0.9 |   | 
|  |  |  |  |  |  |  |  |  |

Our main currency exposures are in respect of the euro and US dollars. The rates
used for these throughout the accounts are:

|  |                             euro | US dollar | 
|  | **2023** | 2022 | **2023** | 2022 | 
| Period end rate used for the balance sheet | **1.15** | 1.18 | **1.23** | 1.26 | 
| Average rate used for earnings | **1.15** | 1.18 | **1.20** | 1.34 |

**Risks and uncertainties **

The board has overall responsibility for ensuring risk is appropriately managed 
across the Group and has carried out a robust assessment of the principal risks 
to the business. Our operational risks, including emerging risks, are identified
and monitored through discussions at regular risk meetings of the senior management
team. These meetings are coordinated by the internal audit function and assess the
impact of each operational risk as well as identifying new emerging risks and mitigating
actions required. The output of this process is considered and reviewed by the audit
and risk committee twice yearly.

The key strategic risks to the Group are regularly reviewed by the board. The principal
strategic risks identified in 2022/23 are discussed below. These risks are not intended
to be an extensive analysis of all risks that may arise but more importantly are
the ones which we believe could cause business interruption.

·      IT strategy and delivery – with a number of significant business projects
in play, all of which are dependent on IT support, there is a requirement for a 
robust IT strategy which enables us to deliver key strategic projects as well as
supporting day to day activities. We are actively supporting our global head of 
IT in investing in the structure of his team to ensure the IT support needs of the
business can be delivered. We have appointed a new non-executive director, Mark 
Lam, with many years of operational and strategic IT experience to help management
review their strategies and operational plans. 

·      Media – whilst this remains an area for future growth, it is imperative that
exploitation of our IP through media channels does no harm to our core business.
Our IP steering team meets every month to discuss ongoing and future exploitation,
to ensure that all use of our IP, through all channels, is approved, correct and
consistent. It is fully supported by our in-house legal team who will act when needed.
The operational board meets quarterly to review progress and current status of all
licensing projects. 

In addition to this, we have a number of additional operational risks but we do 
not consider these to be principal strategic risks.

**Priorities for 2023/24**

We are making progress with our key priorities. Each of these is designed to ensure
we deliver our exciting operational plan and continue to engage and inspire our 
loyal customers and attract new ones. 

As part of our overall strategy, six key initiatives will be prioritised in 2023/
24. These are designed to deliver further sales growth whilst maintaining our core
operating profit margin and continuing to surprise and delight our customers. They
are in addition to our investment in new product quality and ensuring our new factories
and warehouses deliver the appropriate cash payback. 

_Staff training and development_

We care passionately about our global team. We have ambitious long-term plans, but
we also run the business with only the resources we need. We will continue to recruit
essential new jobs or where we need to back-fill positions. Like last year, many
of these recruits will be in order to scale – in our factories and warehouse facilities
as well as in our support functions, mainly IT. 

We will continue to support lifelong learning and training to develop the skills
needed to enable all our staff to be successful. We are also more active in developing
orderly succession plans of both the board and senior management. We continue in
our commitment to diversity and inclusion at Games Workshop. 

_Growth_

We are planning to add a further 30 new stores: 16 in North America, 11 in Europe
and 3 in Japan. 

We again aim to grow in every major country in the world, and via all of our three
sales channels with all of our core IP. Our online store will have a new platform
and will be rebranded for launch in 2023/24. Phase one will have no major bells 
or whistles but will be a more stable technical solution. We look forward to more
hobbyists signing up to My Warhammer, the gateway into our fantasy worlds. 

We will continue to open more independent retailer accounts. Selling via physical
outlets remains an important sales channel for us. Some have their own online store,
some not. We have seen sales grow in both. 

We will continue to search for and engage with hobbyists everywhere.

_Customer focused_

We will also continue to be customer focused – engaging better with our existing
customers and reaching whole new audiences with the Warhammer hobby, and the rich
worlds it is set within. 

_Social responsibility_

We are committed to ethical sourcing and staff wellbeing, diversity and inclusion.
We will be collecting and reporting internally the ethnicity of our staff and we
will track trends. Committed to diversity, we will continue to performance manage
and recruit for the personal qualities needed to do a particular job as well as 
the necessary skills. I will continue to do my best to ensure this is the case and
that we are fair and free from any bias and/or prejudice. 

_[Sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)–
climate change _

We will continue our work on reducing our carbon footprint in line with our plan
and explain how we are doing against those goals.

_Licensing business_

The priority remains the same to deliver on our strategy by licensing our IP to 
partners who will successfully launch high quality video games, live action or animation
shows.

**Outlook**

We finished the year having delivered eight consecutive years of Group sales and
profit growth – in the period we reported the highest level of sales and the most
profit we have generated since flotation 29 years ago. As for the future, in our
30th year we will continue to focus on product quality – in June 2023 we launched
the best Warhammer 40,000 range of miniatures in our history… we wait to see if 
our hobbyists like them as much as we do. Our international team has been sensational
again, thanks to you all.

**Approved by the board, and signed on behalf of the board**

**Kevin Rountree**

CEO

24 July 2023

**Statement of directors’ responsibilities**

The directors confirm that this condensed consolidated financial information has
been prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and UK-adopted International Accounting
Standards and that the management report herein includes a true and fair review 
of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·     an indication of important events that have occurred during the period and
their impact on the condensed financial information, and a description of the principal
risks and uncertainties; and

·     material related-party transactions in the period and any material changes
in the related-party transactions described in the last annual report.

A list of all current directors is maintained on the investor relations website 
at investor.games-workshop.com.

By order of the board

**Kevin Rountree                                                                
Rachel Tongue**

CEO                                                                             
CFO

25 July 2023

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