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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.
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.
All this has significantly de-risked the business. We have far fewer key personnel to replace if need be, and a much lower cost base (£2 million p.a. less). It has cost, in total, around £4.5 million to accomplish. The new web store allows us to sell online more efficiently. It cost around £4 million.
This augurs well for our long term health and cash flow.
What is really remarkable, however, is that it was all accomplished in five months. The levels of complexity handled by our 'back- office' staff – personnel, IT and accounts – are beyond my descriptive abilities. And yet it was co-operatively done with precision, efficiency and calmness at a ferocious speed.
We all owe these people a big vote of thanks. They have saved the company millions.
Working with people like this is why it is a pleasure to work here.
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. Our crops will wither, our children will die piteous deaths and the sun will be swept from the sky. But is it true?
Last year I published the secret that I believe is at the heart of what makes this business great. Steve Jobs once did the same over at heavily litigating Apple. He said they ignored everything that did not lead to 'insanely great products' and that was what made them great. None of the people Apple are suing are trying to do that, so why sue?
I said, ‘we recruit for attitude and not for skill’. It is what makes us great. It is those people who design the miniatures; those people who make them and those people who sell them; those people who transformed our business systems in five short months. I have been deluged with two comments about that statement, neither of which was: 'you fool, you just gave away the crown jewels'. Why doesn't everyone do it? Ask them.
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. I run through the list from time to time when someone says that computer games will be the death of us – they are so much more realistic now! – again. This year it is 3-D printing. Pretty soon everyone will be printing their own miniatures and where will we be then, eh?
We know quite a lot about 3-D printers, having been at the forefront of the technology for many years. We know of what we speak. One day 3-D printers will be affordable (agreed), they are now, they will be able to produce fantastic detail (the affordable ones won't) and they will do it faster than one miniature per day (no, they won't, look it up). So we may get to the time when someone can make a poorly detailed miniature at home and have enough for an army in less than a year. That pre-supposes that 3-D scanning technology will be affordable and good enough (don't bet the mortgage on that one) and that everyone will be happy to have nothing but copies of old miniatures.
All of our great new miniatures come from Citadel. It is possible that one day we will sell them direct via 3-D printers to grateful hobbyists around the world. That will not happen in the next few years (or, in City-speak, 'forever') but if and when it does it will just mean that we can cut yet more cost out of the supply chain and be making good margins selling Citadel 3-D printers.
At the heart of the delusion is the notion that designing and making miniatures is easy. It isn't.

On the first of January next year I will be stepping down as CEO of Games Workshop. I intend staying on as non-executive Chairman (if the board will have me), so those of you who want to see an end to these preambles (rhymes with rambles), don't get your hopes up just yet.
The board has prepared a job specification for CEO, and the consequential advertisement. The ad. will be published the day after our AGM (September 18th). If you apply, we require that you write a letter saying why you want the job. No letter, no interview. The interviews will take place on November 7th and will be at Nottingham. An announcement will be made the following week. We have not decided what will happen if no suitable candidate is found but I suspect my wife will be livid.
Let me dilate about this letter. Last year I wrote here about our recruitment process, and shortly afterwards we recruited a new non-executive director (NXD) using the method described. We got a great (not good, great) new board member. She is still surprised that I did not read her CV (exasperated would be a more accurate word) but there was no need. Her letter told us what kind of person she was: sincere, open-minded, a learner, excited at the opportunity. The interview told us she had all the qualities needed. It mattered not one jot what her CV said. Appointing NXDs because of their careers rather than who they are is at the heart of the rot in the corporate world.
Tom Kirby
Chairman and acting CEO 28 July 2014



http://www.beastsofwar.com/games-workshop/kirby-stepping-gw-ceo-interesting-preamble/
 

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It's an interesting read, even if it does come across as a little bitter. It seems like some board members have expressed doubts about his leadership, and this letter is trying to hit back at them. The restructuring of a company in the way that they restructured their stores is no easy task to undertake, and he is absolutely correct in saying that to accomplish it with minimal disruption to the supply chain in the space of 5 months is quite impressive.

Where he is so full of shit that his eyes are brown, however, is in the 3D printing section, as well as their recruitment of a new CEO. On the 3D printing thing; if they think they'll be able to sell templates for miniatures that people can print themselves for even a fraction of the profits that they currently make then they're deluded. The number of skilled amateur 3D artists in the world who could all very easily sketch up a space marine in Zbrush is beyond count. 3D printing certainly wouldnt kill GW, but to say it wouldnt be a major threat to them is nonsense.

'Not going to look at the CV of the new potential CEO' is complete bollocks. Only a moron thinks that a multinational PLC like Games-Workshop are going to recruit a new CEO because of a nice flowery letter describing what a wonderful human being they are. I guarantee you the new CEO will come from a background in corporate management, not someone who's just such a great guy. And that's not anything surprising, nor is it wrong. Games-Workshop is a business, so it is only correct that they are run as a profit-generating machine. It's vital to the survival of our hobby that Games-Workshop continues to make substantial profit, since without them we'd have no Warhammer. So all the people who say 'let me be CEO because i'll bring back squats, drop prices and make everything better in big bad corporate GW' need to sit the fuck down.
 

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I was under the impression Kirby was going to stand down after the restructure had been completed, so this is not really that big a surprise.

GW are still making money and I see very little in the report finacial report that would indicate they are going to go out of business any time soon. Its not as if they have loads of debts to pay off, which is what kills most companies.
 

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http://www.belloflostsouls.net/2014/07/bombshell-gw-2014-annual-report.html

Yeah... but... Those numbers won't mean the company is going down anytime soon... At the same time, it's showing very poor company policies. Let's hope that getting no dividends for one year will make the message clear that some change might be good from the old tactics:

- almost no support for the community/tournaments/events
- radio silence
- steady price increases

Clearly a rapid release tactic isn't helping. If ppl feel like they aren't getting enough bang from their buck when it comes to disposable income, they'll take the money elsewhere.

Or get their stuff in another way. The second hand market has never been this crazy because of the large amount of people who are disillusioned by the game... It doesn't matter if you personally think the game is in a good condition. If many customers feel like it isn't, that's bad... in the long run.

I profitted from that recently by purchasing over 130 guardsmen second hand for €50 (of which 60 were new on sprue, the rest in need of an isopropanol bath). That's about €280 retail value btw... Reason for the low price: more people selling then buying. While it's nothing that GW can't recover from, it will take some readjusting of policies.
 

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ahh its that time of year again, lets see if i remember how it goes again, ahh yes theres basically two camps, those who think GW have shot themselves in the foot and this financial report is the beginning of the end and the other camp who will be pleased to see that despite a difficult year GW still made a profit.

as it happens i agree with him about the 3D printing thing, it will have an impact, but wargamers are generally lazy and quite loyal to the company for the most part, GW have been battling the second hand market since they produced there first model,they have managed to weather so many different and varied things potentially taking away sales from them that i have total faith that in the event we get to a point where 3D printing is viable i can see them just selling warhammer GW printers and the consumables to go with and still enduring long after we think they should have folded.

i personally believe the drop in sales and profit in the last year has nothing to do with the games or the company but a simple and i expect a short lived phenomenon of a glut of kickstarters related to the hobby, i personally think that the last 12 months has seen a huge number miniature/wargame based kickstarters and quite a substantial part of peoples budgets have been invested in that arena, i have also noticed that quite a few of them are now being sold or traded online for dare i say it GW stuff since 7th edition launched. I think the number of wargame kick starters has slowed down lately or at the very least backers are not as prolific now as they were which could be for various reasons like essentially reaper minis broke the system by offering tons of stuff and Mantic dreadballs models having serious problems or people seeing the same stuff rehashed or worried the company might go tits up.

All in all i think GW do an amazing job producing stuff, but its almost expected of gamers to hate them:scratchhead:



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very true, though in all honesty i think we are pretty well balanced on here,but by jingo there are some bitter people over on warsneer , 9 or 10 pages of bile on this subject.
I know the type, full of hate, but you know when they are alone in their bedrooms, they are naked and sobbing as they open another box of G.W minis and rub the sprues over themselves in equal portions of self loathing and delight!
 

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http://www.belloflostsouls.net/2014/07/bombshell-gw-2014-annual-report.html

Yeah... but... Those numbers won't mean the company is going down anytime soon... At the same time, it's showing very poor company policies.
There must be two articles or just a comprehension issue somewhere.......

It's actually showing that GW have weathered the storm of a company taking on a huge restructuring and maintaining profit whilst doing so,
it shows they are changing policies to streamline themselves and improve efficiency,
any company that was restructuring itself to this level would love to be in the position that GW is....
 

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A superb summing up of the report by Reinholt over at Warseer, and it is certainly not ‘bile’. He knows what he is talking about, which, with respect, most of the previous posters on this thread, do not.

Kirby, a lot of the upper management and the five members of the board all need to go. Then the company may just survive.

Bellow copied from Warseer, written by Reinholt.

http://www.warseer.com/forums/showt...al-Report-Thread-Full-report-available/page14

BELLOW WRITTEN BY REINHOLT
On the topic of the financial reports for GW, I have several thoughts after reading the 2014 report.

Revenue (£mm):

2006: 115.2
2007: 111.5
2008: 110.3
2009: 125.7 (119.4)
2010: 126.5 (120.2)
2011: 123.1 (116.9)
2012: 131.0 (124.5)
2013: 134.6 (127.9)
2014: 123.5 (117.3)

There has been significant currency volatility in the markets over this period. The large bump in 2009 relates to currency valuation changes (GW would have cleared 113.9mm at constant currency).

So for starters, the largest revenue increase in the past 8 years for GW was due to external currency markets. That's fine. These things happen when you are international, but it is something people should be aware of. As a very rough plug, knock 2009 revenue and forward down 5% (those are the numbers in parenthesis, just like this statement) to figure out constant currency numbers. This is not perfect. You can use your own method. The point is to get a rough idea of where GW is in terms of revenue.

The punch line? They have, in terms of actual sales to actual customers, about the same revenue as 2006 if we correct for currency valuation. If we don't, they are just below 2009 levels. I wouldn't call this picture good, but I also wouldn't call it bad. Whatever complaints one may have with GW, they aren't currently bleeding revenue everywhere, and are flat over 8 years. Many companies have done worse.

Profit (£mm)

So who cares about revenue? I mean, some people, but what most people care about is profit.

2006: 3.7
2007: (2.9)
2008: 1.1
2009: 7.5
2010: 16.1
2011: 15.4
2012: 19.5
2013: 21.4
2014: 12.4

You can see two things going on here. First, GW had way too much overhead pre-2009. The cost cutting was genuinely beneficial through about the 2010 timeframe. However, post that, while profit is increasing (driven largely by royalties), the power of cost cutting begins to fade. Eventually, you run out of costs to cut without also degrading your operational capabilities. GW is at this point now. The past history is good but the future outlook is negative as a result; they have to return to revenue growth to drive additional profit, and significant revenue losses are likely to lead to running actual losses (as in 2007) from a profit/loss perspective. This should be alarming given that they lost significant revenue year over year.

Players

This is somewhat more complicated. Basically, to determine how many people are buying GW products, you have to have a view of what the average long-run rate of price increase for GW products are, then you have to adjust for the currency changes. I'll start with non-controversial stuff. There are three numbers: assuming a 2.5% price increase, a 5% price increase, and a 7.5% price increase. Essentially, this is a guess at units (boxes of models!) sold per year:

2013 report vs. 2014 report by region:

UK: -11.1% / -13.8% / -16.5%
EU: -13.1% / -15.9% / -18.7%
NA: -15.2% / -18.0% / -20.8%
RoW: -23.2% / -26.2% / -29.2%

2006 report vs. 2014 report by region:

UK: -25.6% / -38.6% / -49.1%
EU: -43.45% / -53.3% / -61.3%
US: -7.97% / -24.0% / -37.0%
RoW: 19.72% / -1.16% / -18.0%

So obviously, that's not good. By any measure, as it's clear prices are slowly moving up (I think 5% for the overall mix may not be off the mark, as not everything moves up by leaps and bounds) and that players are leaving. GW absorbing these rates of player attrition for another 1-2 years, despite price increases, will mean the company runs a loss.

The short-term rates and long-term rates of purchasing are both bad. GW has been losing players for a sustained period, and the rate of player loss is accelerating. I've mentioned network effects before (and it seems to be getting particularly bad in NA of late), but GW has now bled off enough players that lost sales beget more lost sales. Price increases will no longer pay for themselves (in fact, they probably lose money on price increases now).

Basic Analysis

Caveat: I don't intend to be 100% precise with some of my assumptions, close is good enough here. If you have a different method, your numbers may (by which I mean almost certainly will) vary, but the overall trends will remain identical to what I have found unless you are plugging in things that are wrong (currencies going backwards, prices going down, etc.).

So here it is: GW is finally approaching the inflection point. In the next 2-3 years, if they cannot reverse the customer loss trend or find further costs to cut, they are going to start running losses. If customer losses accelerate (a thesis based around how much they lost despite their release schedule this year), they are likely running a loss within 1-2 years. Based on their cash position and the loss sizing, I suspect they have 5-7 years of runway without further adverse events. If the losses accelerate, I suspect they have 3-5 years of runway. Obviously, more cost cuts and retrenching can delay all of that, but it will delay it at the cost of both revenue and long-term profits, so it will damage the stock price and expose GW to takeover risk.

GW is at the point where they need to change. I do not yet believe it is "too late" from an operational perspective. However, I do believe it is too late from a management perspective. Unless Kirby stepping down leads to the new CEO burning the entire board, turning over the majority of the staff, and dramatically changing the firm, they cannot engineer a multi-year turnaround in the timeframes they have available. At this point, my opinion has flipped from "GW has plenty of time left, even though they are poorly run" to "GW has a moderate amount of time left, and they remain poorly run".

The core issue remains customer satisfaction; the secondary issue is improving competition. Every year, GW loses customers to other firms. The longer this goes on, the harder it is to win them back, and the stronger the competition becomes. This is why it's no longer an unlimited timeframe exericse - GW is not alone (or mostly alone). PP is still growing, FF is becoming their own sort of thing, and multiple smaller competitors continue to nip at GW's heels.

Long-Term Questions

I won't purport to answer all of these here (though I can discuss as this thread goes on), but the long term questions for GW are:

1 - Can they improve the quality and breadth of their game offerings? Like it or not, rules sell models.

2 - Can they find a strategy that works in NA (or the rest of the world, but NA in particular started bleeding this year), or will the increasing customer losses continue or accelerate?

3 - Can they change their attitude towards community interaction?

4 - Can they (dramatically) lower the cost of entry?

5 - Can they find further costs to cut without damaging the core of the company?

6 - Can they suffer through a stock price drop with another weak 1-2 years without a competitor/external firm taking them over? As if this happens, GW may not be determining their own fate anymore.

Enjoy.
 

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The sky isn't falling, not by a long shot. They are still making a profit, they aren't in any financial distress. It would be ridiculous to claim that they are going down. :eek:k:

Claiming that these numbers are good, and that it's not really needed to do a bit of internal reflection at GW, is about equally ridiculous though.

If your sales are still sliding down graduadly, despite the release bombardment, despite 7th, despite marines and IG being released, that's not good. In fact, they are pretty damn honest that it's not good. If your CEO starts off with: "it's all good if disregard the actual numbers on there", something is fishy.

BTW, nobody is saying that GW is releasing crappy products these days. I don't think you'll ever read about that being something that needs to drastically improve.

But their marketing is definitely something to look into. If I were a betting man, I would not put money on their sales increasing a lot in the near future. Good marketing increases sales, simple as that. :wink:
 

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I know the type, full of hate, but you know when they are alone in their bedrooms, they are naked and sobbing as they open another box of G.W minis and rub the sprues over themselves in equal portions of self loathing and delight!
As Dave Berry's "Crying Game" plays quietly in the background......
 

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At this time I feel he (Kirby) has done a great job, whatever internal. Strife within the Citadel work enviroment is foolhardy. The company took a nosedive and he pulled it out of the ashes, their product has gotten more flavorful in the last 6 months then in its last 5 years.

This is my opinion.
 

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Reinholt from Warseer may appear to know what he is talking about with one exception. He doesn't mention the general economy. GW is a 'luxury' product, and since 2006 people have gradually got less and less to spend on luxuries with rising higher inflation over much of that period but lower than inflation wage rises (certainly in the UK). This is not expected to balance itself in the short term so I expect the next few years to have roughly the same profit margins.
 

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Well, a single change in leadership is not going to be enough to turn around this self-proclaimed IKEA of plastic toys into this century.

-Rid of all physical stores
-Rid of the rubbish Citadel tools line
-Rid of all paint apart from the very most indispensable foundations, approach Vallejo for licensing a cross-promotional deal. Citadel is empirically inferior
-Increase licensing cost of video games involving space marine protagonists, make licensing free for games conversely about xenos
-Use more xenos in everything

Then maybe 40K won't seem like such a daft/ kiddie IP to outsiders. And the company won't have to make 95% of customers subsidize facilities only 5% of the hobbyists get to use with a 300% plastic crack mark up.

But that's never going to happen, delusions of grandeur are so close to the bone marrow in these puckheads.

BTW, nobody is saying that GW is releasing crappy products these days.
Is that so, how lovely of you for speaking for everyone, I'm sure the Fisher Price Heldrakes, astrum militarum Chibii-Trucks and embossed-emblem Dark Vengeance Dork Angels are universally loved by everyone.

No wait, that is not the case
 

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Reinholt from Warseer may appear to know what he is talking about with one exception. He doesn't mention the general economy. GW is a 'luxury' product, and since 2006 people have gradually got less and less to spend on luxuries with rising higher inflation over much of that period but lower than inflation wage rises (certainly in the UK). This is not expected to balance itself in the short term so I expect the next few years to have roughly the same profit margins.
Well, oddly enough, their highest revenue peak was between 2009-2013 though, despite all this crisis and recession talk ;)

Is that so, how lovely of you for speaking for everyone, I'm sure the Fisher Price Heldrakes, astrum militarum Chibii-Trucks and embossed-emblem Dark Vengeance Dork Angels are universally loved by everyone.

No wait, that is not the case
Oh wait, here's the one guy who did it! Of course not everybody is ever going to say the same thing. This isn't f*cking north Korea where you HAVE to all like the same thing. In general, people aren't complaining too much about the quality of the models (except for very some models). I'm talking about a trend here, a lot of the new models are hugely popular (knights, scions, hunters, wyverns, the new defence lines,mega-nobz, wraithknight, riptide...)

The occasional miss doesn't justify you, or anybody else, saying that the whole range up untill now has been utter garbage. In general, they are doing a superb job.

But I'm not sure how much attention I should pay to this, or the "solutions" you just offered... :rollseyes: Guess there's more than one reason why Norway can be considered troll country? :laugh:
 

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Ahh dont worry about metal handkerchief, he would complain you had given him the wrong bacon if he was one meal from death.

Stats and numbers can be spun to look positive and negative , a drop in sales isnt unusual , when the previous two years were above expectations, year on year growth is amazing but is also very difficult to sustain, over a ten year period GW sales are about £122 million on average so the past year is slightly above average, but inline with other years.
As always with these reports people take from them what they want, I have read posts were people say kirby is bitter and twisted or delusional, I just read it as a guy who was surprised how well and quickly things had been achieved and because of that the company stayed in the black and even made profit.

in terms of the economy I think this year has been the hardest , im not earning any more than last year but what I do earn is not going as far as it did, we are being told the economy has recovered but many of the things we rely on have already increased prices without wages catching up, this is proven by the sheer number of people in food poverty in the Uk at the moment, but like I said previously I dont think its all about the economy, kickstarters are what has hurt gw and other companies in my opinion, GW see a drop in sales the same year that Kickstarters boom isnt a coincidence.



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in terms of the economy I think this year has been the hardest , im not earning any more than last year but what I do earn is not going as far as it did, we are being told the economy has recovered but many of the things we rely on have already increased prices without wages catching up, this is proven by the sheer number of people in food poverty in the Uk at the moment, but like I said previously I dont think its all about the economy, kickstarters are what has hurt gw and other companies in my opinion, GW see a drop in sales the same year that Kickstarters boom isnt a coincidence.
Fair enough. It is harder... I just bought my own place, so I know what financial hardship is like atm... ;)

However, thinking about the recent kickstarter craze and how much money ppl dropped into them, I can't help but wonder if this is a "chicken or egg thing"?

You could argue that sales are down because people are spending a lot of money on kickstarters (they did boom like crazy). But this is what I mean with internal reflecting... Are there so many kickstarters and are they so hugely popular because people are starting to look for something that will give them a bit more bang for their buck?

I'm no expert on the whole thing, but is there less money being spend on wargaming in general, or more? Maybe the cake is getting bigger, but GW's slice is just slinking a lot?

and finally:

Ahh dont worry about metal handkerchief, he would complain you had given him the wrong bacon if he was one meal from death.
I do know him, don't worry. I'm just a humble science teacher... I'm therefor in no way an expert in economy, but being a teacher does make me somewhat of an expert in little shits... ;)
 
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