Games Workshop

Tabletop war games retailer Games Workshop has announced pre-tax profits up 114% to £16.1m for the year to May, on modestly-increased sales of £126.5m (2009: £125.7m).

Games Workshop, with 382 UK stores and a range of popular fantasty games including Warhammer and Warhammer 40,000, attributed the profits surge to factors including a headcount reduction that led to a number of stores becoming one-man operations as well as a salary freeze and the introduction of warehousing efficiencies.

Mark Wells, CEO, says Games Workshop is now 'a much leaner business which is preparing itself for many years of steady profitable growth' and adds that 'we no longer spend money on things we don’t need, like expensive offices or prime rent shopping locations, or advertising that speaks to the mass market rather than to our small band of loyal followers'.

Games Workshop, which makes its money by selling miniatures, books and accessories for its fantasy and futuristic tabletop games, is now selling online as well as through a telephone service. The company looks well placed for growth in a niche market, with its outlets – or ‘hobby centres' – also organising tournaments for enthusiasts and showing customers how to paint and play with its products. 'Even though we have been in the UK for 35 years, we still see opportunities for growth here', explains Wells, whilst also identifying international opportunities in Eastern Europe, Asia and Latin America.

Perpetually unloved, with investors perhaps failing to grasp the resilient, specialist nature of its business, shares in Games Workshop have climbed substantially from their 2009 low of around 120p and should have further to go.

Debt-free and set to pay a 30p dividend this year, Games Workshop looks undervalued, with its shares selling for less than twelve times earnings and offering a 7.1% yield.