Annual Report 2022 - 2023

[Joe]

Games Workshop PLC's Annual Report is now available.

[RikuEru]

Imma say it for everyone:

We will wait for N1SB's Analysis of the Annual Report.

And the input of those who have actual knowhow like he does.

[Final Sunn]

I read it because I was bored at work.

Only thing that I noticed, other than the fact they made loads of money, is the the Old World is soon to be released, which I guess we already knew, and that Warhammer+ subscriptions increased to a total of 136,000.

[ZeroWolf]

The other take away is that amazon negotiations are ongoing still.

[Marshal Rohr]

They didn’t seem to harp on the IT transformation as badly this time and the new Lam guy being appointed to direct the project seems like we might see some improvement in the that is their production and warehousing. Who knows, maybe in 23-24 we will able to actually buy the new releases! That’s a novel thought. 

Edited July 25, 2023 by Tyriks
do not dodge the swear filter

[Scribe]

1 hour ago, Marshal Rohr said:

They didn’t seem to harp on the IT transformation as badly this time and the new Lam guy being appointed to direct the project seems like we might see some improvement in the that is their production and warehousing. Who knows, maybe in 23-24 we will able to actually buy the new releases! That’s a novel thought. 

 

Imagine if they can actually get items in stock in a timely manner so I can order Titanicus stuff...

Edited July 25, 2023 by Tyriks
quote

[System Sound]

Werent they supposed to "upgrade" their online store front, based on last years report?

[N1SB]

I bow my red-robed head most deeply in humility, especially since I made a mistake last time (that I've since been rectifying).

 

My knowhow comes from me being a Hobbyist 1st, a Techpriest 2nd and...way at the end of the list, a former investment banker.

 

So let's talk about you.  Let's talk about me.  Let's talk about this thing we share we call The Hobby.

 

 

+++ My Long Debate With a Fellow Hobbyist Who Was a CFO +++

 

 

I've a friend, ControllEric.  Aside from being a Regional Financial Controller (basically the CFO for a continent), he actually played Controller Wizards in Dungeons & Dragons, thus his nickname.  We met over a D&D campaign and, naturally, I got him into Warhammer...and of course he's a better player than me now.

 

He and I have had this, until recently, an unresolvable disagreement about how far Warhammer can grow.  With both of our backgrounds in finance, we look at Games Workshop's revenue just as an indicator of How Many Players x How Much Money They Spend.  We follow the same stream of thought, but diverge here:

• ControllEric: Warhammer is a niche thing, thus it will cap out because there are only so many potential players
• Me: in the history of everything that is mainstream, there was a time when it was considered a niche thing

He moved back home a year back, but he visited just 2 weeks ago, and we decided we were BOTH WRONG.  Here's the real limitation (and will be for awhile):

 

 

ControllEric was noticing things like Brother Henry Cavill discussing this niche thing we do on mainstream talk shows, an Amazon deal, but niche vs. mainstream isn't as big a deal as demand vs. supply.  What neither of us foresaw was how demand was outstripping supply with all the Temporarily out of stock Online.

 

You remember how Games Workshop said they're putting everything on creating Leviathan sets so everyone who wants one will get one.  If there was no such production limitation, they wouldn't have to say something like that; they want to sell more Leviathan AND everything else.

 

Then limited Lion El Johnson and Commander Farsight models.  I went to the Games Workshop site the other day and saw a timer to order those.  It's like buying those minis is harder than getting tickets to Elton John's last concert.

 

Put more simply, let's say Warhammer explodes with an Amazon streaming show, more people will be interested in it than ever before!  Yet it won't matter to The Hobby or Games Workshop or its investors if they've got no more miniatures to sell them.  Even with an amazing TV show, this will be the showstopper.

 

 

Here's a pic of ControllEric when he came back.  I miss him.  He's way smarter and more experienced than me.  I feel like the Joker without Batman.  On this topic, he went online, then to Japan, trying to get a Lion El Johnson mini.  I got him one as a present moments before this photo.

 

So what does this icebreaker of a story have to do with Games Workshop's annual report released just hours ago?  It's this:

 

 

+++ Here's What I Was Afraid Of (But GW CEO Is Not Wrong) +++

 

 

 

Games Workshop has "decided not to expand our manufacturing footprint further during the year."  It's what I was afraid of, but I don't blame the CEO:

• Sooner rather than later Games Workshop will really need to expand its manufacturing footprint or it can't grow
• But I'd have made the exact same decision if I was in the CEO's position...now's the wrong time for expansion

The problem is the UK economy right now is very unstable.  It's like when we got the 1st Indices for 10th ed and we're like "they're going to nerf this thing with Deathwatch's Devastating Wounds, right?"  We didn't leap to buy anything, we're like "yeah...I'll just play with the armies I got while things settle."

 

And I think that's how Games Workshop feels right now.  Our Brothers in the UK already know this, but for those outside the UK, there's a lot of discussion about Interest Rates about to go up.  The UK uses Variable Mortgages, meaning the house payments might shoot up, beyond people's means to pay them.

 

So in the same way it's a really bad time to think about buying a house in the UK, it's a bad time for Games Workshop to buy another factory.

 

(If anything, I'd be thinking of building a factory in Memphis, Tennessee, USA, to diversify.  But it's equally bad for Games Workshop at this moment.)

 

Both Timperial Guard in my meta and Brother Green Scorpion here, who have 1st-hand experience, told me there have been advances in mould injection technology to do more with less, but based on how many things are Temporarily out of stock Online, empirical evidence suggests it's not enough.

 

In the meantime, it really sucks!  What am I going to do with my Aeronautica Imperialis squadron that I've got a 90%+ win rate with?  But at least we got Epic, right?  I'll return to this later, but in the meantime, just something more interesting for here on Bolter & Chainsword...

 

 

+++ We Totally Accurately Estimated Warhammer+ Subscriptions +++

 

 

 

We actually calculated out that Warhammer+ had about 100,00 players.  I remember we came from both directions:

• A previous report mentioned how many views there were, and you guys figured it out via content x user views
• I just looked at a line item I thought was the Warhammer+ revenue and divided it up by the time period

See?  Revenue isn't really about money, it's really about people.  The real skill is to never lose sight of that.  Great job, everyone, we totally saw through it.

 

 

+++ As For the Actual Earnings Report +++

 

 

 

Reminder that Games Workshop's financial calendar begins in June.  This means 2023 includes the period from Horus Heresy 2.0, but NOT 10th ed 40k.

 

So I mentioned I made a mistake and how I was rectifying it, let me show you where so you can avoid my same mistake.  Revenue is called the Top Line because it's literally the top line, £445.4m from £368.8m sounds awesome, right?  That's like 20% growth, which is amazing, and typical for Games Workshop in recent years.

 

However, with the UK economy in turmoil, the real numbers are Revenue at constant currency, £447.3 from £414.8, which sounds less awesome.  That's like 8% actual growth.  However, the UK's Gross Domestic Product is expected to grow a measly 0.3% this year, so Games Workshop is doing decently considering.

 

For comparison's sake, Dungeons & Dragons the game is estimated to be about £100m, while Magic: the Gathering is closer to £1 billion.

 

Where did I screw up?  Last Half-Year Report that reflected the release window for Horus Heresy 2.0 looked really good at 1st, but only because it was due to a political situation that crashed the UK economy, making the British pound plummet.  With Games Workshop using US dollars as its currency, it inflated their Revenue.

 

What it meant was the Horus Heresy 2.0, which I love, I've changed to a World Eater Fury of the Ancients List now, just kept actual, real money Revenue flat.  Games Workshop hasn't had that lack of growth since before Age of Sigmar 1st edition General's Handbook.  I was more upset about the state of 30k than my error.

 

I also mentioned before, and I still believe, that Horus Heresy 2.0 doesn't YET have the same magic as when the Black Books came out, and I'd come to this board to hear what Mr. Parker, Lady Atia, Brother Valrak share what happened at the latest Horus Heresy Weekender.  But that can change, I have genuine hope for 30k.

 

What I don't have hope for is the above no more factory expansion situation.  That's an honest to cog limitation.

 

I am sincerely concerned that Games Workshop will just rely on further price increases beyond the recent ones to grow.  However, Games Workshop seems to have some sensitivity towards their UK home-base customers if nothing else, talking about the inflating cost of living, so that may stay their hand.

 

This leads to the following thoughts...but there may be a silver lining to these coming storm clouds.

 

 

+++ My Very Optimistic But Logical Prediction +++

 

 

Did you guys wonder as I did why, after pushing Horus Heresy 2.0 so hard, they shoved so much of those products in 40k Legends?  Games Workshop finally released a plastic Leviathan Dreadnought as well as other 30k Vehicles, don't you want to sell more?  It's like 30k and 40k are competing against each other.

 

It made me think of what I observed working in Big Tech.  We didn't just have 1 monopoly, we had multiple monopolies...and I actually fought with my colleagues to sell my monopolistic product over theirs, we wasted more of our time fighting amongst ourselves than against our competitors.

 

I remember this incident when 2 Product Managers were fighting over who could print hundreds of basically brochures on the office printer.  A director had to settle that dispute by asking not just which would potentially make more money, but which deals were more certain.  Revenue vs. Opportunity Cost for damn pamphlets.

 

I imagine the equivalent happening in Nottingham right now.  Like some Main Studio manager and some FW manager are fighting for the limited mould injection machines, like the Recruit Edition version of the Leviathan set vs. the coming Epic scale Legions Imperialis starter set are competing against each other.

 

It's no longer about just how much Revenue, but how little Opportunity Cost.  So what's the optimal solution?  2 categories:

• Whatever they make, they want maxed out sales, meaning the most they can sell and with nothing left over
• They also want something that can fit on the fewest sprues possible, less factory time, more efficient use

Epic made perfect sense.  Fans clamoured for it, plus they can fit a lot of teeny weeny Mareens onto a sprue.  I mean, look at this:

 

 

I believe that was the sort of logic that brought back the 1st Specialist Game, Blood Bowl.  2 sprues was a whole team, it's low tier, but I'm still using the Nurgle Team.  It was licensed to become a computer game, they're coming with the 3rd one now.  Games Workshop is looking for these safe, cheap bets again.

 

Likewise, the popularity of Total War: Warhammer probably lead to The Old World Returns.  That'll be more than 2 sprues and I know that's Fantasy, but did you notice they're really just doing Bretonnians and Tomb Kings, than the rest they're like "buy the AoS range so we don't have to print more."

 

So what's a proven property that had a successful computer game adaptation, that fits on the minimum amount of sprues?  Spoiler tag:

 

 

My prediction, which sounds crazy so I won't bet my life on it, but I honestly believe is what's next is that this time next year we'll see previews of:

 

BATTLEFLEET GOTHIC: THE HORUS HERESY

It's the 1 thing that's had already 2 computer games and you can make tiny spaceships on few sprues.  By setting it in the Horus Heresy, you can use the same models for both sides, the same logic behind Legions Imperialis.  They want something to tie them over until they can expand their factories, I think this is the best option.  There's still going to be a new AoS edition, this is on top of that, to at least push some growth.  Beyond that, I don't know, Imma go to bed now.  Hey Brother RikuEru, did you change your portrait?  Looks awesome.

 

 

It's getting late, sorry for the long post, no time to write a short one.  I don't think I'm wishlisting here, it's more like what I would do in the CEO's predicament.

Edited July 25, 2023 by N1SB

[Doghouse]

Just promise me you will never change mate, no one will ever think less of you for your long posts when it comes to the annual report.

[Lexington]

Thanks as always for the sober and well-informed analysis, N1SB! Wonder how much that production bottleneck figured into the choice to eliminate several older Marine minis.

 

Otherwise, my big surprise is that Warhammer+ subscriptions actually increased. That thing became a content ghost town after the first few months.

[Zeratil]

40 minutes ago, N1SB said:

I

 

 

+++ Here's What I Was Afraid Of (But GW CEO Is Not Wrong) +++

 

 

 

Games Workshop has "decided not to expand our manufacturing footprint further during the year."  It's what I was afraid of, but I don't blame the CEO:

• Sooner rather than later Games Workshop will really need to expand its manufacturing footprint or it can't grow
• But I'd have made the exact same decision if I was in the CEO's position...now's the wrong time for expansion

The problem is the UK economy right now is very unstable.  It's like when we got the 1st Indices for 10th ed and we're like "they're going to nerf this thing with Deathwatch's Devastating Wounds, right?"  We didn't leap to buy anything, we're like "yeah...I'll just play with the armies I got while things settle."

 

And I think that's how Games Workshop feels right now.  Our Brothers in the UK already know this, but for those outside the UK, there's a lot of discussion about Interest Rates about to go up.  The UK uses Variable Mortgages, meaning the house payments might shoot up, beyond people's means to pay them.

 

So in the same way it's a really bad time to think about buying a house in the UK, it's a bad time for Games Workshop to buy another factory.

 

(If anything, I'd be thinking of building a factory in Memphis, Tennessee, USA, to diversify.  But it's equally bad for Games Workshop at this moment.)

 

Both Timperial Guard in my meta and Brother Green Scorpion here, who have 1st-hand experience, told me there have been advances in mould injection technology to do more with less, but based on how many things are Temporarily out of stock Online, empirical evidence suggests it's not enough.

 

I'm local to the area, the new factory is very swish I hear from people who've seen inside it. 

GW has always been very UK Manufacturing focussed, I'm not sure they've ever had long term production of miniatures outside the UK? (As opposed to books and other materials which are done elsewhere). A couple of other factors in their decision will be expanding again in the Nottingham area could be quite hard. The UK labour market very tight atm (low unemployment, many unemployed due to early retirement or health reasons). The East Midlands, where Nottingham is, has one of the lowest unemployment rates of any area in the UK. I know that GW had issues staffing up the last new factory they built in decent time. If their plan is to continue to be A.) UK based and B.) close to GW HQ there's more than one reason to be gun shy on a new plant.

Edited July 25, 2023 by Zeratil

[Scribe]

5 minutes ago, Lexington said:

Wonder how much that production bottleneck figured into the choice to eliminate several older Marine minis.

 

Something has to be done, its been crazy for what feels like the last year.

[caladancid]

I don’t know how subscription services work amongst other companies, but signing up 100k the first year and then getting 1/3 of that the next year seems not great. Also counting anyone as an active user if they’ve logged on within six months is quite the way to hide a drop. 

[Mechanicus Tech-Support]

As always thank you for your insight and taking the time to do your writeups N1SB!

 

Honestly on the subscription front sure 1/3 growth doesn't seem great but they didnt lose subscribers, and I wonder how much they care about the active user base as long as those users stay subscribed and feeding them money.

 

Makes me wonder how many are doing it just for the model  

Edited July 25, 2023 by Mechanicus Tech-Support

[Captain Idaho]

So going back to your last analysis, you mentioned the state of AoS is dire simply on the basis that there's next to no growth for a big game despite a major edition change/update... but you've since revised your position on the Horus Heresy being successful...

 

What does that mean for the previous analysis? And what does they mean for the future of both AoS and HH as mainline game systems?

 

Is the release of Epic and Warhammer Fantasy a test so to speak to see if they can replace the flagging HH and AoS systems with a more efficient model system to increase sales margins?

[Marshal Rohr]

I don’t think GW will ever expand production to the US, even if it’s for specialist products they’ve had made previously like terrain kits. They can barely be bothered to keep North America stocked as is. 

[Rusted Boltgun]

It has been said before, GW is quite risk averse. 

Investment in a further manufacturing plants, especially one abroad, comes at a cost. For one on home soil, there is the site, the facility and staffing. 

Some of the difficulties with this have been noted above.

Moving abroad adds legal costs and ancillary staff burden (and more besides, I'm sure).

The recent Painting Phase episode with an ex-GW staffer stressed how important GW  take quality control - the example given was paint QC. This would be an additional risk with taking production away from Notts.

A parallel could be drawn with Tamiya who expanded production from Japan to the Philippines. Some say that products from the new factory aren't as good when it comes to mould lines, paint quality on pre-painted items and other things.

Offshoring is only worth it if the profits are sufficient to make it worthwhile - examples such as Tamiya to the Philippines, UK customer service call centres to South Africa - and costs are significantly lower.

I'm sure the CEO has more one eye on a way to bring in sufficient funding to expand production if they can't afford to do it themselves 

Edited July 25, 2023 by Rusted Boltgun
Poor proofing

[Dark Shepherd]

Something they could outsource to free up manufacturing space would be making the paint pots (and filling them), paint is made off site

 

I think we're also seeing with the Legends/rotation stuff that theyre aggressively freeing up warehouse space

 

I would be AMAZED if part of the Amazon negotiations arent over distribution/Amazon selling more stuff esp starter sets

 

*also have to single out N1SB's awesome point about 30k competing with 40k*

 

Without going off on one, the North of Ireland could be an excellent place for an extra factory

Edited July 25, 2023 by Dark Shepherd

[NovemberIX]

18 minutes ago, Marshal Rohr said:

I don’t think GW will ever expand production to the US, even if it’s for specialist products they’ve had made previously like terrain kits. They can barely be bothered to keep North America stocked as is. 

Which strikes me as very silly, you would think that they'd build production capacity to handle the Americas. I've been idly thinking about what if they opened a facility in one of the new Mexican industrial parks they've been building. I'm sure they could get some sweet tax incentives, among other labor cost savings with space to integrate production for printing boxes and books or other accessories.

 

One thing I have been sitting and kinda considering when it comes to 40K and it's possible mainstream debut, there's a lack of good merch, and everything is kinda a mess where it all sorta contradicts each other and you never get a feeling of, "oh, this is definitively 40K". What I mean is, everything is sort of always an abstraction of something else. Marines on the table are not the ones in the books, and those are not the marines of the PC games. So when Ole' Jimmy starts watching The Cavill show, how does that turn him into a GW customer? Models seem too tedious, the books too many to decide where to enter, the PC games a smattering of good B-tier projects with a lot of chaff to get through. Like I said, idle thoughts.

[Redcomet]

The amount of items out of stock at the moment is quite insane. But that is not just a GW problem. Several hobby companies have become victims of their own success. Bandai has been struggling for years too. And adding production facilities isn’t just something you do overnight 

[redmapa]

Quote

you never get a feeling of, "oh, this is definitively 40K"

 

 I disagree with this, 40k has a very unique identity and that's the grimdark of it all, it's death metal turned into a miniature game and very few things out there look like 40k and that's something that I hope isn't lost once this goes mainstream. As to the Canon, it doesn't matter if it's not set in stone imo, 40k is an aesthetic with which you can tell stories and that's what star wars has become with is myriad of series and movies, they are tied together by that space western aesthetic and what 40k should embrace more asxit goes mainstream.

[Scribe]

24 minutes ago, NovemberIX said:

you never get a feeling of, "oh, this is definitively 40K"

 

 

This gif serves 2 purposes.

 

1. It absolutely is 'definitively 40K'.

2. Your post is heresy. ;)

[Halandaar]

22 minutes ago, NovemberIX said:

Which strikes me as very silly, you would think that they'd build production capacity to handle the Americas. 

 

Coming at this from an absolutely amateur level, but this seems like a huge cost sink for a benefit that could be gained much cheaper by just expanding production capacity at Nottingham. Even if they needed to add another machine, they can probably house it in an existing building or in a new building on land they already own and it can share access to raw materials storage and warehousing that already exists, rather than having to set up every aspect of that from scratch. Sure then there's international shipping costs, but you'd have to think that's cheaper than setting up a duplicate factory on another continent?

 

Basic napkin-maths example:

500 Lion El'Jonsons & 500 Farsights produced in USA as well as 500 Lion El'Jonsons & 500 Farsights produced in UK - Total boxes produced 2000, total factories needed: 2, total machines needed: 2, total molds needed: 4

VS

1000 Lion El'Jonsons & 1000 Farsights produced in UK - Total boxes produced 2000, total factories needed: 1 total machines needed: 2, total molds needed: 2

 

Obviously it's over simplified, but on the face of it you get the same amount of overall kits produced with half the investment in molds, factory sites and god knows how many other costs.

[Flaherty]

16 minutes ago, Halandaar said:

 

Coming at this from an absolutely amateur level, but this seems like a huge cost sink for a benefit that could be gained much cheaper by just expanding production capacity at Nottingham. Even if they needed to add another machine, they can probably house it in an existing building or in a new building on land they already own and it can share access to raw materials storage and warehousing that already exists, rather than having to set up every aspect of that from scratch. Sure then there's international shipping costs, but you'd have to think that's cheaper than setting up a duplicate factory on another continent?

 

Basic napkin-maths example:

500 Lion El'Jonsons & 500 Farsights produced in USA as well as 500 Lion El'Jonsons & 500 Farsights produced in UK - Total boxes produced 2000, total factories needed: 2, total machines needed: 2, total molds needed: 4

VS

1000 Lion El'Jonsons & 1000 Farsights produced in UK - Total boxes produced 2000, total factories needed: 1 total machines needed: 2, total molds needed: 2

 

Obviously it's over simplified, but on the face of it you get the same amount of overall kits produced with half the investment in molds, factory sites and god knows how many other costs.

 

I know this will never happen, but you could solve that inefficiency by moving all the production to the US! It's GW's largest market and land/energy are much cheaper. I remember from prior letters that just getting enough electricity was a challenge, and will likely only become more so as the whole of Europe struggles for lack of domestic energy production. Injection mold machines are thirsty beasts!

 

That said, it seems like the GW brass are a loyal bunch and unlikely to trust their precious plastic to the colonies. But you do wonder at what margin moving the machines to the great unregulated expanses of middle America would make sense...

 

[Joe]

Asking a British company, working in a British industry, overwhelmingly supported by and employing British staff to uproot itself (or at the least, a very significant chunk of itself) and move to a foreign country and risk all of the instability, loss of reputation and potential technical skills that may come with such a move is farcical.

 

America is a great country, don't get me wrong, but it's just not practical. Nor appealing.