So now we know what everybody has been doing during lockdown: playing war games with fantastic creatures from Dungeons and Dragons and books by JRR Tolkien. Manufacturer and retailer Games Workshop (GAW) reckons sales for the six months to November 29 were up 25% on the same period last year.
An upgraded profits forecast of at least £80 million issued a month ago is already £10 million out of date. Games has made more money in the past six months than it managed in the previous 12.
It has, unsurprisingly, enjoyed strong growth in online sales that has more than offset the impact of the pandemic on its retail outlets. The Warhammer box set launched in July sold out within a day and we weren’t even confined to our own homes at that stage.
The dividend is raised by 40% and the shares responded with a 1.4% rise to top £100, having gained more than £60 since mid-March.
I don’t play war games, never tried my hand at Dungeons and Dragons as a child, nor am I a fan of Tolkien so I have never really looked at Games Workshop. It’s a warning not to let your personal likes and dislikes influence your investment decisions.
An awful lot of good news is already in the share price and it is possible that investors impatient with the lack of progress in so many companies this year have piled in to grab whatever dividend is going, so I wouldn’t advice chasing the shares higher. Sales growth may slow next year as we return to something like normal.
However, if you got in when you had the chance, you should hang on for the ride. Well done and good luck.
Left on the Shelf
While the coronavirus crisis has helped to sort out the winners and losers, it has often been a symptom rather than a cause of success and failure. Just as Games Workshop was already gaining momentum before the first lockdown, the once highly fashionable fashion retailer Ted Baker (TED) was already struggling before the Spring slump.
Revenue dropped 46% in the 28 weeks to 8 August as a 69% fall in store sales was only partly offset by a rise in online sales. The pre-tax loss widened from £23 million to £86.4 million.
Baker is laying off nearly 1,000 workers, 28% of its workforce, and that’s before Brexit, which Baker reckons is “a material risk”. Talk about getting your excuses ready in good time.
The shares at 120p now stand at only two thirds of their value AFTER the February-March slump. They were top side of 2,500p less than three years ago. There is no reason to think that a turnaround is in sight. Stay well clear.
Delayed Delivery
I had hoped that packaging group DS Smith (SMDS) would have enjoyed a strong showing during a period when more people were having packages sent through the post or by courier services. That doesn’t seem to have happened. Revenue was down 10% in the six months to October 31 and pre-tax profits came in at less than half the level of the previous first half.
There is hope for improvement, though. Smith points to an improving trend throughout the period, with volumes in October 3% higher, continuing into the second half with November 5% up. At least the dividend is resumed after a 12-month hiatus.
I bought in earlier this year when the share price was depressed so was pleased to see the results push the shares more than 4% higher. They have almost recovered to pre-Covid levels and should go slowly higher.
