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  1. #1

    Default GW’s Financials and the Future

    I don't know if GW financials interest you. They interest me. I worked for a financial adviser for ten years, and Economics is an interest of mine.
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    I found a comment on the recent editorial post (GW Editorial: The (Financial) Empire is Burning!):
    greatpieeater says
    “For the fun of it, I decided to pull the revenue and profit from all the annual reports available on GW's website...." <- my kind of guy right there.

    His numbers follow. (I generally use a fixed 3% for inflation, because calculations of the actual rate of inflation are controversial, but he chose to use the Bank of England's figures found here: [url]http://www.bankofengland.co.uk/education/Pages/resources/inflationtools/calculator/flash/default.aspx[/url] )

    Year, Rev, Prof, Rev(IA)
    2014, 123.5, 12.3, 123.5
    2013, 134.6, 21.3, 134.6
    2012, 131.0, 19.1, 135.0
    2011, 123.1, 15.3, 130.8
    2010, 126.5, 16.0, 141.5
    2009, 125.7, 9.0, 147.1
    2008, 110.3, 2.5, 128.4
    2007, 109.5, (1.8), 132.6
    2006, 115.2, 4.2, 145.2

    Their profit was down this year, but is still in a very acceptable range. However, the Revenue Adjusted for Inflation (last column) is bad long-term news. The company has been shrinking since 2009.

    What they do Right

    Interestingly enough, they have done a good job cutting expenses during that period to maintain profitability. A Really, really good job. They are an example of a company with a anti-growth philosophy (AKA a "cash out" philosophy). Contrast that to a pro-growth company like Amazon which reinvests its profits rather than banking them or paying them out in dividends. Here is a graph of Amazon's Revenue and Profit:
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    We've seen with GW, a trend since 2009 of degrading customer relations, because the customers are picking up on the Cash-Out philosophy even without much understanding of the "Big Picture". Privateer Press, and other miniatures companies that are gaining market share are doing so with a pro-growth philosophy, and thus they have much more positive customer relations.

    Generally, companies are able to maintain a cash out philosophy for 3 to 5 years before competitors start developing strong competitive advantages and cashing out no longer works. At that point, the company looks for buyers based on their historically good profits (AKA the last 3-5 years when they were slashing R&D, and other spending needed for long term growth such as play-testing). The recent financial report indicates that they are still doing just fine with their anti-growth philosophy, and we will likely see hemorrhaging revenue for several years to come before the powers that be decide to pull the trigger and sell.

    There is HopeClick image for larger version. 

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    An alternative scenario is that upper management could choose to move in a pro-growth direction in which case profits will shrink substantially, but revenue will usually increase (though it is a lagging indicator of these sort of changes). There are some that have suggested GW is entering this phase in its corporate life. The profit downturn,Tom Kirby's ouster, and the acceleration/fragmentation of codex releases are all hints this may be the case.

    But not much HopeClick image for larger version. 

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    However, Tom Kriby in his Chairman's Preamble to the annual report, spent more time expounding on the successful downsizing: "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."

    Then he does extolling the investments toward future growth: "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."

    As always, reading financial tea leaves is fraught with danger; but for funsies, my conclusion is that we can expect 2-3 more years of winter before pro-growth policies return, and customer relations improve.

    "The beatings will continue until morale improves."
    -Attributed to the Commander of the Japanese Submarine Force.
    Last edited by tag8833; 08-26-2014 at 06:47 AM.

  2. #2
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    Default

    do you mind if I copy and paste this every time some idiot screams about "profit" as if it was the only important indicator of a companies health?
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  3. #3
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    Default

    I think it is disengenous to state that they don't re-invest money. yes the do pay out a load of money through dividends and have been doing so for a long time (since they started being profitable again iirc).

    But they do invest quite heavily in new machining and proptyping. If you had been to the studio open days/gamesday you will see that they have invested quite heavily in 3d protyping technology. Which may not sound terrifically thrilling, but it does mean that we are getting sprues packed to the rafters with extra gubbins.

    3% is tracking a fraction high but even so, it is still a big concern taking that into consideration.

    I do hope that GW do do something that iwll push sustainable growth rather than chasing after profits. You can understand when the company had large (ish) debt that they were chasing profits to put themselves into a stronger position position and to buy new technology, but things like that have changed.
    Fan of Fuggles | Derailment of the Wolfpack of Horsemen | In girum imus nocte et consumimur igni

  4. #4
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    I think the article this thread references was a tad hysterical, the author kept saying they had lost money this year when they merely made less.

    However the process of robo-insemination is far too complex for the human mind!
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  5. #5

    Default

    GW survived their revenue halving in 2005/6 I think they can survive this. They have no debt an are still profitable so they are in an excellent position to change their business practices.
    Ask not the EldarGal a question, for she will give you three answers, all of which are puns and terrifying to know. Back off man, I'm a feminist. Ia! Ia! Gloppal Snode!

  6. #6
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    It all comes down to will. Which is an unknown thing
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  7. #7

    Default

    Yup. Rather worried by the CEO or whoever saying 'we don't do market research, but we sell our product primarily to middle class teenage boys'. If they convince themselves that is who they have to aim at and that doing things which might make them uncomfortable (like represent women and minorities) might put them off then we could end up with a really regressive GW at a time when they need to be broadening their customer base.
    Ask not the EldarGal a question, for she will give you three answers, all of which are puns and terrifying to know. Back off man, I'm a feminist. Ia! Ia! Gloppal Snode!

  8. #8

    Default

    Quote Originally Posted by daboarder View Post
    do you mind if I copy and paste this every time some idiot screams about "profit" as if it was the only important indicator of a companies health?
    It's a more positive indicator than losses and debt.....
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  9. #9
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    I think the trouble is that they end up with "word of mouth" and if you look at your local GW on a Saturday afternoon, you will see that it is full to the brim with white teenage boys. What you don't necessarily see are those who pop in and out during quiet times that drop more on the hobby than those who activiely spend time in the shop. Or those who buy via mail order because it is unpleasent/inconvenient to pop in store.
    Fan of Fuggles | Derailment of the Wolfpack of Horsemen | In girum imus nocte et consumimur igni

  10. #10
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    Default

    Quote Originally Posted by Mr Mystery View Post
    It's a more positive indicator than losses and debt.....
    .............
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