Investors respond to Games Workshop and Card Factory results

Visitors walk past the Realms of Ruins Warhammer game at Gamescom in Cologne, Germany, in 2023. Photo by INA FASSBENDER/AFP via Getty Images.

The “straightforward” approach of high-flying Games Workshop Group (LSE:GAW) came under blue-chip scrutiny for the first time today after the hobby firm posted a typically robust set of results.

Unlike most FTSE 100 companies, the Warhammer figurines business holds no debt, doesn’t hedge against currency movements and only distributes truly surplus cash to shareholders.

It also rejects the use of long-term incentives for executives, believing they go against the “forever, team effort and leadership” behind the creation of a £4 billion company.

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Chief executive Kevin Rountree made no mention of the recent promotion to the FTSE 100 index, although he did use the interim results to reference the business culture that has powered the doubling of the share price since October 2022.

He said: “Key among them is humility. So, while we are very proud of our achievements, we remain grounded, pragmatic and ego free.

“We know through experience that, at Games Workshop, speculation is unwise and extrapolation is a fool’s game. We will therefore continue to stay focused on managing the business under all scenarios. So far, so good.”

The first set of results as a FTSE 100-listed company showed half-year profit up by a third to £126.8 million, which comfortably beat City forecasts nearer £120 million.

Core revenues rose by 14.3% on a constant currency basis to £269.4 million, with trade channel growth up by 24.3% thanks to a 7% increase in the number of accounts. Retail sales lifted by 13.3% versus tougher comparatives.

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Manufacturing operations delivered record volumes, although Rountree admits there’s still work to do after write-downs of stock in the company’s warehouses came in £3.6 million higher than the same period last year.

He added: “This is all well within our control, so we will continue to fine-tune the details to find some improvements.”

Core operating margins increased by just over one percentage point to 36.4%, while cash generated from operations lifted £15.6 million to £132.5 million.

This performance underpinned another chunky dividend of 155p a share for payment on 28 February, which takes the year-to-date total to 420p versus 315p last year.

A strong start to the second half included core December sales growth of 12% and a licensing deal with Amazon.com Inc (NASDAQ:AMZN) for the adaption of the Warhammer 40,000 universe into films and TV series.

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Broker Peel Hunt upgraded its profits forecast for the current year by £10 million to £220 million, but retained estimates for future years given the potential for US tariffs and to determine whether current trends continue.

It raised its price target from 13,500p to 14,400p, adding: “The shares have performed well, but there continues to be clear momentum and upside to numbers.”

The shares fell back 390p to 12,840p, potentially as a result of uncertainty over the cost increases impacting most businesses in the UK.

Games Workshop doesn’t expect any material impact for the current year as it already pays all its UK staff, as a minimum, close to the new level of the National Minimum Wage. However, it warns the changes in the Budget may drive third-party input cost increases in 2025-26.

Among other retailers reporting today, Card Factory (LSE:CARD) said that it faces an estimated £14 million wage cost headwind for the 2025-26 financial year.

Despite the pressures, the group triggered a positive response from investors by still forecasting a mid-to-high single digit percentage increase in adjusted profit for the period.

The reassuring message also extended to its Christmas sales performance, which was in line with expectations after like-for-like store revenues growth of 3% in November and December.

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This has kept the business, which operates more than 1,050 stores in the UK and Ireland, on track for the City consensus earnings range of £65 million-£67 million in 2024-25.

The shares rallied 5.1p to 95.8p following the update.

They were 143p prior to September’s half-year results, when substantial increases in the National Living Wage plus freight inflation and phasing of strategic investments caused a 34% reverse in half-year adjusted profits to £14.5 million.

UBS believes the shares are in a good position to recover once the near-term downgrades are passed through, adding that there’s potential further upside from geographical expansion. It has a price target of 180p.

The group recently bought US-based gifts and celebration essentials business Garven, giving it a physical presence in the world's biggest celebration occasions market worth $70 billion.