GW annual results - 'best year so far'

[Scammel]

https://investor.games-workshop.com/wp-content/uploads/2020/07/2019-20-Press-statement-1.pdf

 

“An amazing set of results - the best year in Games Workshop’s history, so far. You can once again see from these results that our business and the Warhammer hobby are in good shape. We look forward to the year ahead and will face any challenges head on and learn from our mistakes. We thank our staff and customers and other stakeholders for their continued support during these uncertain times.”

 

Check out the 'Key risks' section in particular:

 

Online selling strategy – as revenue through our online sales channel continues to grow, it is now more important than ever that we have a robust plan in place which ensures we are making product available to our customers in a manner consistent with modern consumer expectations/behaviour. We are reviewing our online selling strategy and the people and technology required to deliver it

 

I'm a happy little shareholder. COVID was practically a footnote.

Edited July 28, 2020 by Scammel

[GreenScorpion]

Given this doesn't consider Indomitus yet, I am guessing next year the report will say something similar on being the best year so far, but with higher values for profits and such.

I fear this will just tell GW that raising prices even more is acceptable, since demand is still very high, but we shall see.
I am certain we will see more limited releases like Indomitus, with a few weeks of hype building before.

[Joe]

No surprises here - the staff recruitment freeze does explain a bugger I came a cropper of.

[N1SB]

I was off about 0.1% in my Revenue forecast and about half a percent in Operating Profit. I agree with you guys that the "best year so far" translates to:

• GW's 2020 performance would've been even more frigging awesome if it wasn't for frigging Covid.

How awesome? As Brother GreenScorpion pointed out, this does NOT include the Indomitus sales that sold out online in 15 minutes, but it DOES include Contrast paints, as well as Warcry, Aeronautical Imperialis, AND the re-launch of Sisters of Battle. Those things alone, WITHOUT Covid, would've netted a bigger year-on-year increase than a whole new edition of Age of Sigmar did (like the 2nd ed launch the year before).

Edit - in case you're wondering, how much would it'd've been without Covid? I forecasted GW's 2020 revenue could've almost reached Edited July 28, 2020 by N1SB

[Joe]

Didn't actually read it that closely, did you N1SB?  It's by not from.
 

Studio payroll costs have increased by £0.8 million to £8.9 million; as a percentage of Group revenue they have increased by 0.2% to 3.3%

That's an increase of £8.1 million to £8.9 million, which is still fairly substantial.

[Brother Dimetrius]

Sold this morning prior to earnings (after a huge run up since April), did not expect this!

[N1SB]

Depending on when you bought, you probably still got massive capital gains, and you should not feel bad.  Now you got a bit of emergency cash, or, alternatively, you can buy more Indomitus sets.  Good thing either way.

[Marshal Loss]

The BL point is an interesting one, particularly with the HH winding up. I wonder if they'll change their approach in an attempt to better benefit from Warhammer's popularity.

Edited July 28, 2020 by Marshal Loss

[m0nolith]

I'd like to point out that this is a second annual in a row that GW has called Heresy as one of their key three brands, the other two being 40k and Sigmar respectfully.

This indicates to me that GW is in this for the long haul when it comes to 30k.

Edited July 28, 2020 by m0nolith

[GreenScorpion]

My guess is that there will be limited releases for new stuff, similar to the Sisters release and Indomitus, not sure yet what that would be, as I am not sure how many things it would make sense for primaris to fight on limited releases. Perhaps a Sisters versus something box to get some funds from the overall desire for the new sculpts of the Sisters.
Some Eldar stuff has already had some updates on a limited release, as well as GSC. Some other Xenos, IG and some Chaos parts might be the focus next.

 

Either way, limited releases seem to be doing very well, combined with things like the new paints and so on.
Any release for older stuff, like it happened with the sisters, will likely be used to keep the profits high.

The company seems to be on a very good financial status, costs are way lower than revenue, which is good for them.

[N1SB]

I'd like to point out that this is a second annual in a row that GW has called Heresy as one of their key three brands, the other two being 40k and Sigmar respectfully.

This indicates to me that GW is in this for the long haul when it comes to 30k.

 

Kudos to Brother Monolith and all those of you who noticed this multi-year trend (I didn't until I read this, and I checked, and you're right).  GW has a tell when they put these together, whenever they start categorising stuff, especially in troikas, it like shows when they really thought about a thing.

 

There's a precedent I really noticed in the summer of 2017.  Old CEO just talked about existing vs. new customers.  New CEO talked about existing, new, then also lapsed customers.  At the time, as a product marketing manager, I just thought new CEO recognising that category was just more up-to-date thinking about customer churn/life cycle, how someone who stopped being a Warhammer player might...after years of absence...might get into it again.  I myself was a lapsed customer for about 2 decades, starting in 1st ed then dropped off around 3rd ed, really started painting again around 6th ed, perhaps many of you are, too.

 

Later in 2017, after talking about lapsed customers, GW released Newcromunda.  In that, some 40k Beastmen and Squats.  Then Adeptus Titanicus.  Then Aeronautica Imperialis.  Most recently, a Zoat.  Basically all the stuff old lapsed players are nostalgic for.  In retrospect, the categorising of then targeting new cool stuff at lapsed players seems like a very deliberate decision on GW's part.

 

The other thing I noticed was, so Horus Heresy is like the 3rd pillar of GW now.  You guys remember when the Lord of the Rings range was like that?  LotR had a smaller but very dedicated narrative-driven player base that, once they're into it, bought The Lot.  I don't know what'll happen with that license with the new Middle Earth streaming series or whatever coming, but it's almost like GW wants to replace that with Horus Heresy (which also appeals to a smaller but very dedicated narrative player base).

 

 

Any release for older stuff, like it happened with the sisters, will likely be used to keep the profits high.

The company seems to be on a very good financial status, costs are way lower than revenue, which is good for them.

 

 

So this is always a great point but particularly now.  More profitability is fundamentally good, but in times of crisis, it also adds like this huge buffer that lets you tough out the situation.  It's like it gives you a way to catch up.

 

Warhammer minis are often described as plastic crack and it's not outrageous since GW has a ridiculously high gross margin that's currently of 67%, which means if you bought a $10 box of miniatures, on average that cost around $3.30 to make, the $6.70 is GW's profit.  Obviously, an expensive HQ character will have a higher gross margin then a box of Troops, but this is a weighted average.  I've used this example before and you may remember GW's gross margin used to be 70%, so I used to say that $10 mini cost $3 to make.  So it's a slight drop, but it's one that coincides with aggressive expansion, so not that bad a thing, like GW's paying their guys time-and-a-half extra pay for overtime to satisfy excessive demand (like...say...when they sell out a very popular set in 15 minutes and they try to make more in a hurry).

 

What I did NOT mention until now, because I had to explain it to a friend, was how high that is in relation to other products/services.  I'm going to drop some famous names and give their rough gross margins, so you have a point of reference.  I'll quickly give a list now from big famous names you know and their gross margins from memory, so please forgive me if I'm a few percent off.

 

So rough gross margins, higher is better:

 

• The GAP (that clothing brand): in their teens, like 12.5% or something
• Walmart (everday low prices, but very successful): around 25%
• Apple: 40%ish or something
• Louis Vuitton Moet Hennessy: the luxury clothes and alcohol, 50%ish
• Microsoft and Google: software/tech has very high gross margins, low 60%ish
• Games Workshop and LEGO: close to 70%, man I worked in IT/tech, I should've followed my heart and worked on little plastic figures

 

The only thing that has higher gross margins than Games Workshop that's not some obscure technology I can think of is:

 

• Facebook: 80%ish
• And actual crack cocaine: high 90%ish, and the main reason I'm not sure is I don't know how much they pay in bribes and stuff, but we actually got pretty good estimates of the costs of the raw materials vs. finished product from police agencies around the world.

 

So take a look at any of your miniatures.  On average...and of course HQ characters have higher gross margins than a basic Trooper...but on a dollar-for-dollar basis statistically that's more profitable than an iPad/iPhone/iWhatever.  It blows my mind every time I think about that.

 

That's not to say they're overpriced, I think I derive more value from my cheap Warcry warband than any Xbox game of the same price, I'm prouder of my Army On Parade than any console I've ever bought, but it's a little bit crazy to put into perspective.  

Edited July 28, 2020 by N1SB

[GreenScorpion]

I work in the automotive sector, we get reports like the one linked every 3 months, margins are way lower, but graphs are all shiny and colourful.

My current company certainly has a higher revenue (with Covid it might be less on some periods though, which is dangerous), but margins are very low and if nothing changes in the management things will go badly in the next couple years, it has happened before and it will happen again, as people don't learn from their mistakes.

 

Nostalgia makes money, I have seen lots of retro inspired games, clothes... the list just goes on and on. People often would like to turn back time, but it just keeps flowing like a river, always down stream.

 

If we all could work on what we would like to and make a living, I certainly wouldn't be making software. That is why I write books, chasing the dream (I already sold 2 digital copies, very negative profit margin :D ).

 

Lets see where GW's growth cycle will lead.

[Lucerne]

Hey, want to hear a joke?

 

"GW is a business and that's why they need to make more Primaris instead of updating everyone else's basic troop sets and sculpts. The poor dears would go broke if they didn't spam yet another redundant and ugly Primaris wave."

 

I say this because now's the time to bring up that argument for the last time.

 

Maybe this surge in profits will get them to actually update proper factions for once, but I expect they took their success to mean "more Primaris" rather than "update the neglected factions so people are motivated to buy them".

 

So yeah, I can't be optimistic about GW having the best year of gouging to date because I don't believe it'll translate into an end to neglect of about half their range or them fulfilling their obligation to their customers.

Edited July 28, 2020 by Lucerne

[RandyB]

Hey, want to hear a joke?

 

"GW is a business and that's why they need to make more Primaris instead of updating everyone else's basic troop sets and sculpts. The poor dears would go broke if they didn't spam yet another redundant and ugly Primaris wave."

 

I say this because now's the time to bring up that argument for the last time.

 

Maybe this surge in profits will get them to actually update proper factions for once, but I expect they took their success to mean "more Primaris" rather than "update the neglected factions so people are motivated to buy them".

 

So yeah, I can't be optimistic about GW having the best year of gouging to date because I don't believe it'll translate into an end to neglect of about half their range or them fulfilling their obligation to their customers.

Product management overall is a weak point for GW. Product support is inconsistent at best, and all but nonexistent at worst (glares at Kill Team). If they can't keep up with the breadth of factions in their product line, bite the bullet and eliminate entire factions. Someone is going to be mad either way, so do what's best for the product line overall and be done with it. Edited July 28, 2020 by RandyB

[Dark Shepherd]

The BL point is an interesting one, particularly with the HH winding up. I wonder if they'll change their approach in an attempt to better benefit from Warhammer's popularity.

For a while a couple of years ago it was kind of hard to get a lot of BL books from GW stores which may have burnt some bridges/led to people getting them elsewhere but leads me too...could BL be losing profits (not sales) to a huge degree to Amazon? Also piracy of ebooks

 

It does feel like BL is not pushed as much as other things or as it could be.

 

Without going too off topic

[MegaVolt87]

I think BL at GW stores has always been an issue regardless. A combination of not enough stock, only they newest content and staff being unable to make proper recommendations because they never read what they are selling. Then again I must be old because I enjoyed going to a book store and talking about what I as buying at the time because the person at the counter actually read the book and initiated the conversation. Guess where I would go back to buy more books? 

[N1SB]

For a while a couple of years ago it was kind of hard to get a lot of BL books from GW stores which may have burnt some bridges/led to people getting them elsewhere but leads me too...could BL be losing profits (not sales) to a huge degree to Amazon? Also piracy of ebooks

It does feel like BL is not pushed as much as other things or as it could be.

Without going too off topic

Not at all off-topic. This is so ON-topic, because not only are Black Library books part of GW's business ("revenue stream" if you're into dirty talk), but GW is trying to use it to build up their new Media & Entertainment division, to build a Warhammer cinematic/TV universe ("leverage" it, if you want to get kinky). So GW made BL super on-topic.

The Black Library revenue includes ALL the money from the books it sold, regardless of original point of sales edit - that is shown is from outside sources under the Trade channel (thanks to Brother Ayatolah of Rock & Rolla for correcting me, ugh, I'm a little off my game during this lockdown):

• Includes digital sales from its Black Library site
• Includes books you bought from a Warhammer Store
• Includes books you bought from a WH Smith or Barnes & Noble
• Includes books you bought off of Amazon, shipped to you in physical form, OR on a Kindle
• Does NOT include piracy, or if you bought it 2nd hand off a friend, or if "borrowed" it off him and never returned it

But just to show, even I get lost sometimes, GW thinks in very GW ways. Edit - it's like, in 40k, sometimes you're wondering why a certain unit (like perhaps Reivers or something) are in the wrong slot (Elites rather than Troops, etc.)

If we all could work on what we would like to and make a living, I certainly wouldn't be making software. That is why I write books, chasing the dream (I already sold 2 digital copies, very negative profit margin ).

Take heart, Brother! Unless you're actually paying yourself in money, your only cost is whatever the online publisher takes off of you. Your royalties are all profit, so I imagine it's as high as GW's, and gz on selling 2 digital copies, that's 2 more copies than most people. But I actually want to comment on this a bit, share a perspective.

Let's do some back of napkin maths with Black Library's Edited July 29, 2020 by N1SB

[GreenScorpion]

 

Take heart, Brother!  Unless you're actually paying yourself in money, your only cost is whatever the online publisher takes off of you.  Your royalties are all profit, so I imagine it's as high as GW's, and gz on selling 2 digital copies, that's 2 more copies than most people.  But I actually want to comment on this a bit, share a perspective.

I know it is pure profit for me as Amazon takes its share, but charges nothing directly to me (unless I lower the price of books below a certain value, which is why the printed version is quite expensive, otherwise I would have to pay to get your copy printed), but it still costs money to do stuff, the laptop doesn't run on water (which is actually free here in Ireland, but it is very expensive in Portugal). I actually run on water a lot as I write, so in Ireland that is for free, as long as it is tap water.

But that aside, I am obviously not writing for the money (although if I could earn enough on royalties, I likely could take a more fulfilling job or a part time, instead) and the fact that my mother reads everything I write like most people reads best sellers is certainly motivation enough. I am halfway through writing the second book of the series, with a third one planned. I also have some stuff for medieval fantasy, but that is in portuguese, although I will pick it up once this series is done.

 

On your math on the books, 20k copies for niche literature like Warhammer still is, is actually not that bad, but I don't have 20k coworkers willing to buy stuff (my friends bought none so far, although they said they would a few months ago, I don't forget while I don't force people to support what I do financially, I dislike when people say they will do X without any intention to do so). I am not really great at marketing, but obviously 2 is already better than 0 and it was 0 for about 4 months.

 

 

Brother GreenScorpion, you've got the technical skills, have you considered turning your writing skills into crafting Warhammer audio dramas on YouTube?  YouTube CPM is about $5, so a 20k view video is like $100 bucks.  2 videos = 1 Indomitus set.  And I don't think your motivation is money, you've got a good job, but have you thought in this direction.

The issue there is if I write my own sci-fi and then write something warhammer/40k related for a video, I wonder if that would attract some bad crowds from GW side. They have been very heavy on things like stl's that resemble their models, they might one day do something similar with their fiction. And honestly my 40k short story was refused by BL very early, so 40k is certainly not the best environment for me to write about

Still, youtube is always an option and I still gets lots of requests on tutorials on modding Dawn of War.

 

I have refrained from publicizing my book and stuff in the forum (there is no direct link not even in the signature), I doubt that would be well received, especially since it is obviously not 40k.

 

I have always liked your detailed reports on the annual results, very interesting reads

Edited July 30, 2020 by GreenScorpion

[MegaVolt87]

 

 

Australia

We are in a rented facility on the outskirts of Sydney. The Warhammer hobby is growing in Australia too and so we are currently reviewing our capacity limits and the need to upgrade our IT solutions. Logistics costs continue to be an area of focus. Total warehousing costs have increased by £2.1 million to £11.6 million; as a percentage of sales they have increased from 3.7% to 4.3%. We would expect this percentage to rise to c. 5% and then remain at similar sales levels following the investments described above.

 

Been saying it for years, GW should be in the real estate business to reduce its operating costs/ logistics. When you own the warehouse space and pay the rent to a sub company that owns the real estate, you are getting all the benefits. Sure, real estate is at a higher premium in OZ, heck commercial real estate is still going strong here despite COVID. Chinese companies have been ahead in cutting their costs by investing in commercial sites in OZ for years. We got the space for the Chinese and the Brits, come on GW where the bloddy hell are ya? 

[Black Knight]

I haven't brought a Black Library book from them since I first returned to the hobby. GW has the market on Plastic figures and was one of the first to create our Hobby(As we see it today). They can dictate exactly how, when and how much something will be sold to a FLGS using contracts and relationships with sellers. If they had to sell through Larger companies such as Amazon only there is no way they could sustain the profit margin they currently are.

 

This is different for Black Library as the Book industry was already there and they have had to integrate into it rather than control. There are customer norms when it comes to books, especially prices. Amazon itself was born from the need for online purchases of books and still exhibit a want to control that market(They pretty much strong armed the Book Publishers into lower digital prices) because without Amazon, good luck getting the exposure). Black Library cannot simply come along and say "Sell for this!" because Amazon, Waterstones, etc turns right around and says we cannot sell it for that so we wont buy any.

 

The amount of money I have recently saved by buying The Solar War from Amazon instead of BL has paid for half the series. I just got the HB version of Saturnine for £14.50. There was also last year a 2-3 Month period of time where none of the new books from Black Library were appearing on Amazon at all. I am not sure if that was a mis-communication between the two companies but it was definitely unusual as I can preorder up to 8 months in- advance on most books.

 

As GW expand out to new areas of revenue, I think it will be similar to the above situation with their movies and TV. They have to sell on mass rather than increase prices to increase profit. Even if they chose to only sell their digital media via their new App at higher prices, such as most of the Games industry have tried to do to bypass Steam(And are slowly finding out that they need Steam e.g. EA), I believe we have hit a turn around with subscription culture.  We are now heading back to one or two Bigger Subscriptions(Netflix alone) rather than 10+ we are forced to now. GWs Media app is too late, it should of been done 3+ years ago and they will be forced to add their new media to other services to keep competitive, which involves keeping to the industry norms. This is all based on the idea that their new media is going to the app though.

 

As a summary, GW do great in the areas where they can control the prices and distribution(Models) but that wont work in areas where they are trying to expand into now and will have to rely on industry norms(Cross pollination) to increase their influence e.g. Hopefully a good Eisenhorn show, followed by some other media that will intern push Black Libraries growth as was seen recently with the Witcher series and the game/book sale increases.

Edited July 29, 2020 by Black_Knight

[Panzer]

Not sure what all influenced those graphs but I was quite surprised to see that numbers tanked more during 40k 7th (and then AoS 1st) than during WHFB 7th and 8th. Just shows how meh 40k 7th and AoS 1st actually was considering that WHFB got scrapped and if they hadn't turned things around with 40k 8th and AoS GHB things could have looked pretty bleak over time. :sweat:

[Xenith]

I havent read everything, but don't forget that 2016 or so was when Kirby was replaced, and you can see the difference. 

 

The 'cut your way to growth' strategy is tried, tested, and failed so often it's ridiculous. I know the new CEO strategy was working, but it's nice to see that their increased spending is leading to increased profits. 

 

 

The initial inception/delivery of AoS was a miscarriage. Whatever the marketing strategy behind it was, and I'm presuming that it was Kirby's 'Models drive sales, people collect models and dont care about the game or lore' attitude, meant it wasn't really interesting. Other people involved have confirmed this mindset. With 2nd ed, we started getting maps and fluff and tighter rules, to make people care about the game, and it took off. 

 

I'm still of the opinion that GW has a lot of growth ahead of it - even after 4 years of rapid growth, indomitus shows us that they still have no idea of how popular their product is.

 

Also remember that most of GW's 40k releases have been primaris. Chaos is super popular and we had a share spike when they released the new kits. We know Eldar also sold pretty well, imagine what will happen when they finally get round to updating one of the most popular factions in the game?

[Noserenda]

I think that graph just shows what a lot of us feel, 7th was the literal worst ;) 

Black library cut its own throat on sales a while back i seem to recall, something about how they sell their books that meant things like "New York times bestsellers" suddenly dried up and upset a few of the authors (Who get a %) who saw less money coming in. I dont remember the exact details but im sure someone does :D So yeah im fairly certain, at times at least, that GW isnt pushing black library as hard as it can, trying to keep it small and in house. That may have changed ofc! 

Margins wise, GW can afford to be so profitable mostly because they have no real competition, sure there are other wargames and other plastic mini makers but GWs tech and reach tend to utterly dwarf anything else, to the extent that investing in any other new system often just means getting burned when they die unless you go all in on them. As compared to say Walmart for example whos whole predatory business model is predicated on relatively tight margins to gain market dominance or even your regular companies who have someone on a par with them in theory keeping their margins lower.

That said with GW going from strength to strength and even the damn Star Wars licenced games failing to make much of a dent long term i dont think thats going to change until 3D printing gets a bit more like star trek :D 

Id mention 30k is a setting with a lot more going on that one wargame too, though we have at least one more year of Novels before they have to show us their hand on that im kind of interested to see how the Old World IP is managed going forward, even without the wargame released its clearly still being used for licensed products successfully but not as a pillar?

[GreenScorpion]

The difficulty with Black Library is also the audience they reach, not just in interest on the topic but also in terms of language and such.

In Portugal, for example, it is very uncommon for people to read books in any other language beyond portuguese and while we sometimes get poorly translated versions clearly done in Brazil or somewhere similar (nothing against brazilians, but they don't really speak/write like we do anymore), most of the times we only get an author published in Portugal if it was already a bestseller in some other country.

Obviously there are exceptions, but in Portugal another issue is that many by the books because they are fashionable, rather than to read them, which means that unless BL books were seen as a trend, few would buy them in that particular market.
I am certain that many other countries face similar issues and thus BL will always lag behind, unless something like a series or movie gets it to a trend status.

[Xenith]

I think that graph just shows what a lot of us feel, 7th was the literal worst  

 

Black library cut its own throat on sales a while back i seem to recall, something about how they sell their books that meant things like "New York times bestsellers" suddenly dried up and upset a few of the authors (Who get a %) who saw less money coming in. I dont remember the exact details but im sure someone does So yeah im fairly certain, at times at least, that GW isnt pushing black library as hard as it can, trying to keep it small and in house. That may have changed ofc! 

 

Anecdotal/emotional evidence, but what killed BL for me was the change from the normal £7.99 (accessible) paperbacks to £19.99 hardbacks followed by £11.99 larger format "trade paperbacks" for most of their releases, but mainly heresy. 

 

It felt like/was an active money grab to paywall the latest heresy stories. At that point, my automatic purchase of every HH novel ended. Because of the price, but also because the new large format would look weird on he shelf with all my original sized books.

 

GW later relented and released "legacy" paperbacks in the original format, albeit ~12 months after the hardback, but the goodwill was lost. I dont think they've ever actually released the larger format paperback HH books again?

 

Edit: Typos

Edited July 29, 2020 by Xenith