Games Workshop: Warhammer maker’s stock dips amid cost pressures
FTSE 100 giant Games Workshop’s stock price dipped three per cent today after warning that rising costs could have a growing impact on its business.
In the Warhammer maker’s half-yearly report, it revealed that profit before tax at the firm jumped by a third, from £95.2m in the first half of last year to £126.8m.
This was “comfortably ahead” of the FTSE 100 firm’s previous £120m guidance, said Peel Hunt analysts Charles Hall and Andrew Ford, leading them to upgrade full-year profit estimates from £210m to £220m.
However, rising costs from employer national insurance hikes and a rising minimum wage introduced in last October’s Budget have left investors worried that cost pressures may begin to impact the company.
While the company said it didn’t expect policies introduced in the Budget to have a material impact on its financial performance this year, as it already pays employees the living wage; it may drive “third part cost increases” over the next year.
“At this stage we have not been informed of any significant changes,” Games Workshop said.
“We await confirmation on any other external tariffs or tax changes and we will manage them accordingly.”
Despite these fears, analysts were still satisfied with the results, noting a 12 per cent rise in core sales during December alone.
“Whilst the core business put in a strong performance, growing by 16 per cent at constant currency, licensing revenue was the star performer with 160 per cent constant currency growth helped by the release of the Space Marine 2 video game,” said Russell Pointon, director of consumer at Edison Group.
Games Workshop’s strong financial performance was joined by a “chunky” dividend announcement, taking dividends to £4.20 per share, up from the £3.15 declared at the same stage last year
“It is clear that management continues to plan for growth in the medium term with planning permission secured for a fourth factory in Nottingham and the purchase of two further properties in the period,” added Pointon.
Of the three analysts who cover Games Workshop, all give a Buy rating to its stock, with no other FTSE 100 stocks receiving a full endorsement from analysts.
However, Games Workshop’s three analysts are unusually small for a FTSE 100 company, likely because it has just entered London’s main index, with most stocks being covered by at least 15 analysts.
“The shares have performed well, but there continues to be clear momentum and upside to numbers,” concluded Hall and Ford.