- First quarter earnings drop 13% despite revenue growth
- Dividend increased 20%
- Shares down 40% year-to-date
Shares in fantasy game miniatures retailer Games Workshop (GAW) retreated 15% to £60.40 after it reported a 13% year-on-year fall in pre-tax profit to £39 million for the three months ended 28 August.
While management said trading was in line with its expectations, the market has penciled in flat full-year profit through May 2023, which implies more downgrades from analysts if current lower profitability persists.
Revenues increased by around 8% to £106 million which is in line with the expected full-year growth rate. Licensing revenues were around £3 million, compared with £5 million in the prior year. License revenues are lumpy by nature.
DIVIDEND BOOST
The board has declared a dividend of 30p per share (25p per share in 2021) taking declared dividends for 2022/23 to £1.20 per share compared with 0.65p per share in 2021/22.
The company said it remained ‘focused on sales growth and cost management’, alluding to the increased freight and raw material costs mentioned in prior updates.
Expectations for fiscal 2023 earnings have drifted down by around 3% since the start of the year while the shares have dropped by around 40% including today’s fall.
FALLING PE
The disparity between the fall in the shares and flattish earnings per share expectations means Games Workshop now trades on a 2023 PE (price-to-earnings) multiple of 18 times compared with 31 times a year ago.
Over the last year shareholders have suffered from the double-whammy effects of rising inflation and higher interest rates.
Inflation has reduced the profitability of the business while higher interest rates which have reduced the value of those earnings.
