Fiends in Waistcoats: GW

Showing posts with label GW. Show all posts

Tuesday, July 29, 2014

Kirby Down but Not Out at Games Workshop

Now I don’t normally blog about news issues here but the turmoil in the halls of power in the Evil Empire effects all of us in the wargaming community whether we want to admit it or not. Mr. Tom Kriby has been forced out of the CEO position but he is still Chairman of the Board so most likely brutal infighting will occupy the halls of power at Notingham for some time to come. Here is a link to the GW annual report.

Here are my personal thoughts on Kriby’s preamble note passages in italics are direct quotes from the preamble.

“CHAIRMAN’S PREAMBLE
Games Workshop has had a really good year.
If your measure of 'good' is the current financial year's numbers, you may not agree. But if your measure is the long-term survivability of a great cash generating business that still has a lot of potential growth, then you will agree.” No company has a good year when they lose one fourth of their value. This is why he’s not CEO anymore but he refuses to accept it.

“Having taken on the conversion of our stores to a one man format with all the concomitant complexity of staff changes and new sites and new lease negotiations – a long job not quite finished – we decided to re-arrange the management of our sales channels from a country-based system to a central one. This meant removing four European headquarters, consolidating all trade (third party) sales personnel at our Nottingham base, creating a new continental European grouping of our retail stores, and recruiting new management for these divisions whilst flattening the structure by removing all middle management. At the same time we changed leadership of our retail chain in the North American area, and gave birth to our new web store after many months’ labour.” Looking beyond the megalomaniacal even fetish like need to try and control a world wide retail company from one location this illustrates that Mr. Kirby has no idea what sort of business he’s in. Let me start by stating that even if Mr. Kirby understood wargming and had good business sense GW would lose market share. Why because GW gained it’s preeminence prior to the rise of the internet. In the 90’s the majority of Sci-fi and fantasy wargamers in the West played one of GW’s core games that's no longer the case now that smaller companies can reach gamers through the internet. Now here’s why Mr. Kirby doesn’t have a clue, GW made the most profit in its history during the mid 2000’s with their LOTR Strategy Battle Game they did this even though internet gaming stores were well established by this time, they did this by bringing in an entirely new group of people excited by the LOTR films through their fleet of very visible high street stores. No other company could have done that and now thanks to Mr. Kirby’s reorganization GW can’t ever do it again. His one man store model will never bring in anywhere near the numbers of new people to GW as the high street model did. What’s worse his naïve belief that the internet will increase GW sales the last thing GW should want is gamers shopping on the internet. On the internet gamers are confronted with a cornucopia of games with prettier models, more interesting rules and cheaper prices. That doesn't help GW's bottom line.

“In the technological world we occupy there is constant debate over who 'innovates' and who merely copies. We have, this last year, spent an indecent amount of your money trying to stop someone stealing our ideas and images. It is a very difficult thing to do when it is done through a legal system designed to prevent people stealing hogs from one another. Our experience has probably been typical of most – far too much money spent on far too little gain. The argument is that we have to do this or we will, bit by bit, lose everything that we hold dear, everything that keeps the business going.” I read this as the board feels he’s spending too much on lawyers. The 0.3 million reduction in legal costs cited in the year end reports suggests to me the tide of IP lawsuits is beginning to recede.

“Because no one seems able to grasp the essential simplicity of what we do there has always been the search for the Achilles heel, the one thing that Kirby and his cronies have overlooked. These are legion.” Actually Mr. Kirby seems incapable of understanding the simplicity of Games Workshop it’s a company that makes games people want to play and miniatures people want or can afford to buy. Interest in GW's core games has been dropping for some time now and a large segment of people who would like to purchase GW miniatures feel they can’t afford them anymore.

Sorry I had to get that off my chest.

Sunday, January 19, 2014

Games Workshop The Decline and Fall

Thurday January 16, 2014

“LONDON (Alliance News) - Games Workshop Group PLC sat firmly on the stock-market losers list Thursday, having seen almost a quarter wiped off its market value, after the games retailer reported a huge drop in profits and revenues for the first half of its financial year.
Shares in Games Workshop were the biggest faller on the London All-Share Thursday, down 24% at 548.00 pence per share.”

Many people have been blogging about this “shocking” event in this post I will show you that this is the beginning of Games Workshop’s inevitable fall into the dust heap of history.

Six months to 1 December 2013 Six months to 2 December 2012

60.5m 67.5m

So Games Workshop lost 7 million in sales in the 1^st half fiscal year of 2014. Considering the price of a GW miniature that is shocking. So what does GW’s report to shareholders say about this?

(From the GW financial report )

“INTERIM MANAGEMENT REPORT

First half performance Sales in the first half of the year were down against the comparable period in the prior year, continuing the trend that developed in the second half of 2012/13. During the first half, the rapid transition from multi-man stores to one-man stores and the reduction of trading hours across the Group caused disruption in our retail chain. We also experienced some decline in sales through independent stockists.

We view these as short term issues and expect to see growth return in both channels. We continue with our store opening programme (27 stores opened, 20 closed in the period) secure in the knowledge that our one man model allows us to insure new openings are profitable. In the future we expect to benefit from the more focussed selling operation across all channels against the background of a materially lower cost base.”

Ok so GW managements excuse for such a massive loss of sales the change from mulit-person to one-man retail stores. This is a major reorganization of their retail operations, and interestingly it removes the cudgel GW has been using to bludgeon the online retailer out of the GW racket. From now on GW will not be providing the “hobby content” (painting days, gaming days) that they have been known for. Now the move to push online retailers out of the GW market is revealed to be an important part of their sales strategy since a customer will no longer receive any more value through purchasing a product in a one man store than they would have on line.

Let’s take a closer look at the sales figures:

REVENUE BY SEGMENT IN CONSTANT CURRENCY

Six months to Six Months to

1 December 2013 2 December 2012

UK 13.7m 15.6m

Continental Europe 16.9m 19.6m

North America 15.6m 18.1m

Australia 4.6m 5.6m

So here you can see that the independent sales contracts GW has forced upon its independent retailers and its constant price increases has resulted in loss of sales around the globe. What does the CEO have to say about this?

Here is the CEO’s assessment of 2012-13 from the financial report:

(http://investor.games-workshop.com/2013/07/30/2012-2013-annual-report/)

“Games Workshop has had a mixed year. Sales were stronger in the first half than the second, but cost control and cash management have strengthened throughout the period. We finish the year with the most profit this company has generated since flotation and have returned £18.4 million to our owners.”

So why is GW the things they are doing to their customers? This statement sums up the direction of Games Workshop quite nicely.

(From the Chairman’s Preamble of the same report.)

“During the year Mark Wells left Games Workshop, after more than ten years, five as chief executive, he has gone to graze in pastures new. His tenure as CEO saw our return on capital increase from around 10% to over 50%. He is a man who truly understands about shareholder value and put that understanding into good practice.

Thank you Mark, and good luck.”

As you can see “a return on capital” has been and reminds the goal of GW management. The owners of GW want a huge return on their investment and management is prepared to give it to them. Take a look at GW’s major investors.

The Nomad Investment Partnership LP 3,450,545 10.9 % of the company

Investec Asset Management Limited 3,087,765 9.7 % of the company

Ruffer LLP 2,492,260 7.9 % of the company

Phoenix Asset Management Partners Limited 1,865,218 5.9 % of the company

FIL Limited 1,753,900 5.5 % of the company

Legal & General 1,683,901 5.3 % of the company

Artemis Investment Management LLP 1,620,001 5.1 % of the company

Look these companies up on the web they are all small Hedge Funds, some rather shady looking like The Nomad Investment Partnership LP out of the Cayman Islands, looking to make money for their clients.

If you take a close look at GW’s revenues you’ll see that they’ve been inflated with massive price hicks over the last few years.

GW’s revenue by year.

2013 2012

134.6m 131.0m

2012 2011

131.0m 123.1m

2011 2010

123.1m 126.5m

2010 2009

126.5m 125.7m

2009 2008

125.7m 110.3m

2008 2007

110.3m 109.5m

2007 2006

111.5m 115.2m

2006 2005

115.2m 136.6m

What’s all this Decline and Fall bull?! This massive revenue loss it the tipping point, the beginning of the end. I suspect out going CEO Mark Wells new full well that he brought the company to this point, but them he made millions as did the investors. They have been looting the company, any return even close to 50% is out right looting.

So now that Mark Wells is gone things will change for the better right? Wrong! The main driver of GW is now The Nomad Investment Partnership LP, the shadowy investment group out of the Cayman Islands. They have increased their position in GW and are now the dominate board controller. They want money, but Games Workshop did not declare a dividend this time the dividend for 2012 was 18p per share and 20p before that. So Expect big price increases in a few months once the sacking of the majority of retail sales staff fails to raise the stock price.

Here are the 3 reasons why GW is on the downward spiral;

1) Price, GW’s marketing department has likened wargamers to heroin addicts we’ll see our mothers to get a fix. That’s true to a point and now the point has arrived. Across the globe wargamers have stopped buying GW not because they don’t want the goodies, but because they literally can’t afford it anymore.

2) Loss of Standing, GW’s has abandoned the “hobby center” in favor of a tiny little one man shop. They are closing down the highly visible high street shops in favor of cheaper rents. These high street shops where the face of GW and a portal for main street to enter wargames street. This loss of visibility is immeasurable.

3) Customer Feed Back, GW’s refusal to solicit or even listen to customer feed back of even the most basic sort has created a profound disconnect between then and their customers. Even the simplest complaint, no hobby content in the White Dwarf, is utterly ignored by a company that survives on discretionary funding. This disconnect not to mention the anger it has generated among its customers has, and will continue to accelerate its loss of sales.

Its fall will not be swift there will be 5-6 more years of falling revenues before GW is forced into receivership. But receivership is where this company is bound.

Saturday, March 16, 2013

Countryside Board

The English countryside is a well ordered pastoral landscape. I remember flying to Heathrow airport as a teen and passing over the manicured fields and towns of southwest England. It looked just like a wargames table from the air. No wonder wargaming is so popular in England! So now on to my country table; its not fully planed out yet. But I do know I want it to look like a picture I have in a book. Its a picture of a ruin on a hill behind a sleepy village. Sorry I don't have the picture digitized. The ruin in the picture looked something like this:

The hill with the ruin will be at one end of the table, a four building village will be in the middle and the far end will have fields and hedges. So you can see, it's sort of planned out.

I'm incorporating a piece of Warhammer scenary into this project as the ruin. Fortuitously for me, my mate had asked me to assemble a GW ruined tower kit some time back. Since we no longer play Warhammer and I'll be scratch building most of the buildings, this seems like a great idea to me to use this as the ruin.

The kit is called the Dreadstone Blight Now I like this kit, its made from thick styrene and is fairly durable. But, its a GW kit so of course it needs hard work to make it fit together. You'd think after all this time GW would have learned how to make a kit that actually fits together properly! But No they didn't. You'll need to do a fair amount of filing to get the first floor sections to fit together and form a circle. I got as close is I could and then filled in the gaps with putty.

You can see where the pieces don't fit exactly. This was as close as I was able to get it.

I had to cover up the gaps where the pieces didn't join together properly with putty. That was basically all of them. Also all the pieces have these jig saw puzzle piece edges. I had to fix the edges that are not supposed to connect to another piece by adding additional stones. The skulls on this piece are not as obnoxious as most other GW scenery kits. Even so I wanted to remove some of the warhammer iconography, but the owner (my mate) dis-aloud it. A bit of a shame IMO. I could have replaced it with some crosses to give it less of a warhammer feel.

Stay tuned for the next Countryside Board update.

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