"Games Workshop accidentally paid dividend worth millions"

[Petitioner's City]

Interesting - GW made a mistake last year and paid it's dividend prematurely!

 

https://www.thisismoney.co.uk/money/markets/article-12337647/amp/Games-Workshop-accidentally-paid-dividend-worth-millions.html

 

A solution will be presented at this year's AGM.

 

Can anyone explain this better?

[Kastor Krieg]

@N1SB mate, any chance for a comment please? would love to hear your opinion :)

[N1SB]

Brothers, I was just winding down on a Friday afternoon, this is as good a topic as any.  Thanks for CC'ing me in.

 

Executive Summary: Games Workshop didn't file the proper paperwork before paying shareholders.  By "accidentally" or "illegally", GW wasn't stealing from you (you can say they're overpriced, but they're not thieves...and here they're trying to GIVE money to their rightful owners), and it wasn't overpaying its shareholders.  It was a lapse in professionalism, not criminal behaviour.

 

I actually got the announcement here in the below spoiler.  Embarrassing for GW, but afaik it didn't get caught...it owned up:

 

 

Games Workshop Group PLC announces that the following documents have today been made available to shareholders:

 

 

Annual Report and Accounts for the 52 weeks ended 28 May 2023("Annual Report"); and Notice of 2023 Annual General Meeting ("AGM").
The Annual Report and Notice of 2023 AGM can be viewed on the Company's website at www.investor.games-workshop.com.

 

The 2023 AGM will be held at Willow Road, Lenton, Nottingham, NG7 2WS, at 10.00 am on 20 September 2023.

 

In addition to the usual business of the AGM, the Board has become aware of a technical issue with regard to the interim dividend of 45 pence per ordinary share paid by the Company to shareholders on 25 November 2022 (the “Interim Dividend”). 

 

When the Company paid the Interim Dividend, the Company had sufficient distributable profits to do so and had prepared interim accounts showing the same, however those interim accounts were not filed at Companies House prior to the payment of the dividend. As a result, the Interim Dividend was paid in technical contravention of the Companies Act 2006. The Interim Dividend amounts to an unlawful dividend only to the extent that it exceeded the amount of distributable reserves available to pay the Interim Dividend shown in the prior audited accounts, being £700,000.

 

As a result of this minor technical breach, it is understood that the Company may have potential claims against shareholders who were recipients of the dividend and against its directors for declaring the dividend. The Company has no intention of bringing these claims.

 

This matter can be remedied by the shareholders passing a resolution which puts those shareholders and directors into the position in which they were intended to be. The Company is proposing a special resolution, which will ratify the appropriation of profits to the payment of the Interim Dividend, waive any rights of the Company against the shareholders who received the Interim Dividend (the "Relevant Shareholders") and against the current directors and those persons who were directors of the Company at the time of the declaration and making of the Interim Dividend, being Kevin Rountree, Rachel Tongue, John Brewis, Randal Casson, Mark Lam, Karen (Kate) Marsh and Elaine O'Donnell (the "Relevant Directors"), in each case in respect of the Interim Dividend, and to approve the Company entering into deeds of release in favour of such Relevant Shareholders and Relevant Directors (the "Resolution").The waiver will be capped at the maximum aggregate amount of the Interim Dividend (being approximately £14.8 million). The Company's entry into the deeds of release will not have any effect on the Company's financial position and no benefits will accrue to the Company as a result of doing so.

 

The entry into the deeds of release in favour of the Company's Relevant Directors and a substantial shareholder (as defined under the Listing Rules), being Baillie Gifford, constitute related party transactions under the Listing Rules. Therefore the Resolution will also seek specific approval for the entry into the deeds of release as related party transactions, in accordance with the Listing Rules.

 

A copy of the Annual Report and Notice of AGM have been uploaded to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism/.

 

Source: https://investor.games-workshop.com/news-posts/noticeofagmandrelatedpartytransactions250723

 

 

You guys know the below already, but we have some younger Brothers here and this post may create the next generation's CEOs, so here I go.

 

Games Workshop, despite our ZEAL, doesn't belong to us.  It is owned by its shareholders that hold its stock, like a token for a tiny bit of GW.

 

A stock is like a subscription...for money.  You subscribe to streaming, you get new shows every few months.  You buy a stock, you get money every few months.  It is sweet and proper to pay your shareholders in a regular and timely manner.  This is called a dividend.

 

This is where it gets interesting.  You hear these supposed experts talk about Profits.  Profit maximisation, profits over people!  It's also PERPETUITY.

 

Perpetuity means like a Perpetual, like the Primarch Vulkan or the Emperor.  They live forever!  Unless psychic stuff is involved!  But with money.

 

But if you take out all the money from a company, it can't pay its staff, or the electricity bill, or taxes, to let it keep running into the future.  So there's a group of shareholders, voted by the others, called Directors, who decide how much can be paid out vs. kept in to keep the company running.

 

It's a constant balancing act of Maximum Profit Now vs. Perpetual Money Later.  Because these Directors who decide payments to shareholders are shareholders themselves, they're kinda paying themselves, so there are rules so they don't take the money and run.  When there are changes, you gotta update that.

 

What changes were there in Games Workshop's business?  The obvious one is their explosive growth:

 

 

Since 2016, Games Workshop sells 400% what it used to since like forever, with Profits more than 1000%.  With that sort of growth, they probably blew past whatever amount they previously agreed upon...and forgot to update their paperwork to reflect that.  It's embarrassing, but success is never shameful.

 

The worst part is...but don't quote me on this, I don't know exactly how these are written...GW might have contradictory rules, like:

1. (Hypothetical) GW MUST pay 1% of its Profits to its shareholders in a period
2. (Mentioned in announcement) And GW MUST NOT pay more than £700,000 in a period

So in the recent annual report, GW earned like £170 million in profits.  By the 1st rule, it's supposed to pay 1% of that, or £1.7 million.  But by following that rule, it violated the 2nd rule, it paid more than it's supposed to in that period.  It's like those rules were written in a time before they imagined such Profits.

 

This is like when you're pulled over by 2 cops with guns pulled on you.  The 1st is shouting, "GET DOWN ON YOUR GROUND AND KEEP YOUR HANDS ON THE GROUND," while the 2nd is shouting, "DON'T MOVE AND PUT UP YOUR HANDS!  I SAID PUT UP YOUR HANDS!"  And you realise they just want to shoot you.

 

The other thing I just checked was, did GW mess around with the dividend amount somewhere?  Answer's no, looks legit.

 

Back in October, they said:

 

 

So they already said they would pay a certain amount.  Then the payment happened in November, as they said.  Then now:

 

 

In other words, Games Workshop did what it was supposed to do, what it said it would do, but somewhere was a form they needed to fill and didn't.

 

I leave you with a cool Latin term, because if there's 1 thing Warhammer teaches, it's Latin:  Ultra Vires

 

Ultra Vires means like it's beyond your authourity.  You're an Inquisitional Acolyte, just a Henchmen, hunting heresy.  There's a heretic hiding on a planet.  You call Exterminatus on the whole planet for that 1 heretic...but you're just an Acolyte, you don't have that authourity.  You just became guilty of Ultra Vires.

 

I believe that's the nature of the "illegal" dividend here.  I mentioned there's rules on how Directors can act.  In the announcement, it's referred to; it's this Company Act of 2006.  It doesn't outlaw greed, or corruption, or anything like that.  It's all about how much power they give to a company's Directors.

 

In other words, it's not about paying, it's about the power to do so, that Directors don't go Ultra Vires...because a government wants ALL VIRES to itself.

 

This is a pretty moot infraction, but it's fascinating because I've never actually seen it happen before!  It's kinda exciting to me right now.

 

(Incidentally, Ultra Vires is what I intend to call a Ultramarines and Successors-related project.  For such Codex Astartes-complaint Chapters, any overreach is severely punished.  But sometimes you need people who bend the rules, like for a Deathwatch unit.  I'm thinking UM and Shield Chapters Deathwatch Kill Team.)

Edited July 28, 2023 by N1SB

[Brother Tyler]

In the interest of avoiding another dumpster fire "discussion" we're going to end on that very informative high note from N1SB.