GAMES WORKSHOP GROUP PLC
Annual report 2015
FINANCIAL HIGHLIGHTS
Revenue
Revenue at constant currency*
Operating profit – pre-exceptional items and royalties receivable
Exceptional costs
Royalties receivable
Operating profit
Profit before taxation
Cash generated from operations
Earnings per share
Pre-exceptional earnings per share
Dividends per share declared in the year
CONTENTS
Chairman’s preamble
Strategic report
Directors’ report
Corporate governance report
Remuneration report
Directors’ responsibilities statement
Company directors and advisers
Independent auditors’ report
Consolidated income statement
Statements of comprehensive income
Balance sheets
Consolidated and Company statements of changes in total equity
Consolidated and Company cash flow statements
Notes to the financial statements
Five year summary
Financial calendar
Notice of annual general meeting
2015
£119.1m
£123.1m
£15.0m
-
£1.5m
£16.5m
£16.6m
£25.6m
38.3p
38.2p
52p
2014
£123.5m
£123.5m
£15.4m
£4.5m
£1.4m
£12.3m
£12.4m
£25.0m
25.2p
36.1p
-
2
3
11
16
20
28
29
30
34
34
35
36
37
38
59
59
60
*Constant currency revenue is calculated by comparing results in the underlying currencies for 2015 and 2014, both converted at the 2014 average
exchange rates as set out on page 9.
1 Games Workshop Group PLC
CHAIRMAN’S PREAMBLE
This year Kevin Rountree took over the day-to-day running of your company. I stayed on as non-executive chairman so you still get this
preamble and my presence in the remuneration report. I will also be helping Kevin as and when he wants it as a consultant from time to
time. It’s early days, but things seem to be going extremely well.
The Great Master Plan continues: cutting costs, becoming more efficient, providing excellent returns on capital and paying dividends. We
do not set out to pay dividends, we set out to run an efficient company that uses money wisely. We know we are doing that well when we
have more money than we need; this becomes your dividend.
One bit of the GMP remains stubbornly unrealised – sales growth. We knew that the huge infrastructure changes we have been making
these last few years (and are still making, we have just signed off on a new ERP system) would be disruptive, so we are not surprised that
many trade accounts across Europe no longer trade with us. Nor are we surprised at the amount of work we have to do to get great
managers in all our stores following the move to one-man operation. Our efforts, unfortunately, have coincided with truly dreadful trading
conditions and, for the first time in our history, a year when the pound was strong against the euro and the dollar simultaneously. Our
natural hedge hasn’t been one this year. You can see the effects of our lack of sales growth in our gross margin, cost-savings in the
maintenance of our net margin, and currency everywhere.
Nevertheless, as I am sure he will tell you, Kevin has plans for sales growth across the board. More stores, growth in our existing stores,
more trade accounts and a better performance from our mail order service.
I do not often talk about our products, partly because I think they speak eloquently for themselves, and partly because it is important for
everyone to remember (that’s owners, customers and staff) we are a business. We need to be here next year if you want more of the
exquisite models we make. To be here next year we have to do what all our customers want, not just a noisy few, and find a way of making
money doing it. This year, though, is an exceptional year. Not only have we just opened a wonderful new visitor centre on time and under
budget (take a bow, Tony) we have also relaunched Warhammer.
The visitor centre is a cathedral of miniatures with the world’s largest and most spectacular diorama. Only £7.50 and a day you will
remember all your life.
The new Warhammer is new. The Stormcast Eternals now bestride the universe and nothing will be the same again1. Not even the front of
our building. Buy Warhammer: Age of Sigmar when you come to the visitor centre or the AGM, and see what we have done.
As I write the world is tumbling in chaos around us. Pundits discover they cannot predict elections, the Americans ride to the rescue of
world football (thank you, Uncle Sam), Sunderland escape relegation, again, the UK will split up into its consistent parts, it will leave
Europe; and yet we struggle on. Babies get born, the rain falls the sun shines and the plants grow, our chickens keep laying, and Games
Workshop still employs over 1,500 people, supporting 1,500 families all over the globe, making the best miniatures money can buy,
providing one of the best investments in our owners' portfolios, and having a great deal of fun doing it.
Tom Kirby
Non-executive chairman
27 July 2015
1 For those who fret about this sort of thing, rest assured no miniature has been made redundant, no army is unwelcome in the new system, no paint job,
no conversion is now worthless. As always we make these changes with great care. Your miniatures are the real ‘eternals’.
2 Games Workshop Group PLC
STRATEGIC REPORT
Strategy and objectives
Games Workshop's ambitions remain clear: to make the best fantasy miniatures in the world and sell them globally at a profit, and it
intends doing so forever. All of our decision making is focused on the long term success of Games Workshop, not short term gains.
This statement includes all the key elements of what we do and why we do it that way.
Before I go into what each key element is I'd like to share a thought. I believe we are a unique business and I understand that some people
find us and our product a little odd and possibly a little quirky too. We are both of these and we are proud of it. I also know I am CEO of one
of the most exciting companies creating fun on the planet. We forget most days because we are all focused on delivering our jobs. Our
Hobby is great fun. We really do intend to be around forever, creating fun.
The first element - we make high quality miniatures. We understand that what we make is not for everyone, so to recruit and re-recruit
customers we are absolutely focused on making our models the best in the world. In order to continue to do that forever and to deliver a
decent return to our owners, we sell them for the price that we believe the investment in quality is worth.
Our customers tend to be teenage boys and male adults with some spare money to spend and time to enjoy hobbies. I'd like to think our
Hobby - modelling, painting, collecting, gaming - is for anyone. Our customers are found everywhere. Our job is to, on a day to day basis,
find them, commercially, wherever they are.
The second element is that we make fantasy miniatures based in our imaginary worlds. This gives us complete control over the imagery
and styles we use and complete ownership of the intellectual property. Aside from our core business, we are constantly looking to grow
our royalty income from opportunities to use our IP in other markets.
The third element is the global nature of our business. We seek out our customers all over the world. We believe that our customers carry
our Hobby gene and to find them we apply our tried and tested approach of recruiting customers in our own stores, by offering a fantastic
customer experience. Our retail business is supported by our own mail order store (it has the full range of our product) and our
independent stockist accounts and trade outlets across the world. The independent accounts do a great job supporting our customers in
parts of the world where we either have not opened one of our stores or where it is not commercially viable for us to have one of our
stores. We will always have more independent accounts than our own stores. Our strategy is to grow our business through geographic
spread growing all of the three complementary channels.
The fourth element is being focused on cash. We want to deliver a great cash return every year so that we can continue to innovate,
surprise and delight our loyal existing customers and new customers with great product. To be around forever we also need to invest in
both long term capital and short term maintenance projects every year, pay our staff what they have earned for the value they contribute
and deliver surplus cash to our shareholders. Our complete dedication and focus should ensure we deliver on time and within our agreed
cash limits.
We measure our success by seeking a high return on investments. In the short term, we will measure our success on our ability to grow
sales whilst maintaining our core business operating profit margin. The way we go about implementing this strategy is to recruit the best
staff we can by looking for the appropriate attitudes and behaviour each job we do requires and identifying the value that job brings. It is
also important that everyone we employ has a real desire to learn and has a great attitude to change. Our Academy offers all of our staff
both personal development and management skills training. It is also worth noting it's not what you know at Games Workshop, it's how
much you contribute to our success, that we value.
We continue to believe there are great opportunities for further growth, particularly in North America and Northern Europe. So, we intend
to keep on growing steadily; if we rush there is always a risk we will compromise one of the above.
Business model and structure
We design, manufacture, distribute and sell our fantasy miniatures and related products. These are fantasy miniatures from our own
Warhammer 40,000 and Warhammer universes. Our factory, main distribution centre and back office support functions are all based in
Nottingham.
We are an international business centrally run from our HQ in Nottingham, with 72% of our sales coming from outside the UK.
Design
Employing 167 people, the design studio in Nottingham creates all the miniatures, artwork, games and publications that we sell. In 2014/15
we invested £7.7 million in the studio (including software costs) with a further £2.0 million spent on tooling for new plastic miniatures. We
are committed to a similar level of investment every year.
3 Games Workshop Group PLC
STRATEGIC REPORT continued
Business model and structure continued
Manufacture
We are proud to manufacture our product in Nottingham. It's where we started and where we intend to stay. During the year we have
been planning a project to upgrade our core IT systems that interface with our manufacturing equipment and systems.
Distribute
All of our product is initially distributed from our warehouse facility in Nottingham. This facility supplies our two hubs in Memphis,
Tennessee and Sydney, Australia and either directly to our trade accounts and retail stores or via a third party carrier. During the year we
started a project to upgrade the IT infrastructure and software for the warehouse that supports our mail order store based in Nottingham.
Sell
We sell via three channels, our own stores ‘Retail’, third party independent retailers ‘Trade’ and our ‘Mail order’ web store.
Games Workshop stores - Retail - they provide the focus for the Hobby in their areas. They only stock Games Workshop product. They are
where we recruit the majority of our new customers. To do so the stores don't offer the full range of our products, they are merchandised
to offer all customers new release product and the appropriate extended range. To achieve this we centrally run automatic stock
replenishment from Nottingham. At the year end we had 418 Games Workshop stores in 20 countries. Our stores contributed 42% of the
year's sales. Over the last five years we have been focusing on ensuring all of our stores are profitable by exiting expensive locations and
converting our stores to one man stores. We believe that this project is in effect complete: we have 324 one man stores, small sites, each
one staffed by only one store manager. We also have 94 multi man stores, which are constantly reviewed to ensure they remain profitable.
If not, they will be closed and replaced with one man stores.
Trade - we sell to third party retailers under closely controlled terms and conditions. They help us sell our products mostly where we don't
have our own stores. The bulk of these sales are made via our telesales teams based in Memphis and Nottingham. We also have small
teams in Sydney, Tokyo and Shanghai. Last year we had 3,700 independent retailers in 52 countries. We have successfully introduced over
the last few years a stockist programme which is designed to sell the right amount of stock into every account in line with their store
format and performance. This programme is reviewed annually. The intention is that we stock all of our stockist accounts with our best
sellers. We strive to deliver excellent service, operating in 16 languages covering all time zones. 37% of our sales came from sales to
independent retailers in the year reported.
Mail order - the mail order store allows enthusiasts full access to all Games Workshop products. It is run centrally from Nottingham. It
accounted for 21% of total sales in 2014/15. All of our stores have a terminal that allows our retail customers access to the full range.
Structure
We control the business centrally from Nottingham; it is where the people with experience and knowledge of running our niche business
work. I have put in place a flat structure: the people with senior responsibility report directly to me. My team is split into three parts: Sales,
Operations and Advisers.
My channel sales structure comprises retail, trade and mail order. This structure is made up of three key territory retail sales managers in
the UK, North America and Continental Europe and a global trade manager. These four individuals have been in their jobs now for just over
18 months and their progress is encouraging. Since taking up the position of CEO I have appointed a new global mail order manager, a new
global digital sales manager, and a retail sales manager for Australia and New Zealand. I also have a sales manager for Asia.
My operations and support structure includes a new finance director for Games Workshop who is responsible for accounts, compliance
and legal duties. I have a product and supply manager who is responsible for our factory, logistics and design studios (Citadel, Forge World
and Black Library). He also manages our three main distribution hubs in Nottingham, Memphis and Sydney. A personnel manager and our
Academy personal development and skills training ensure we take our people recruitment and development seriously. All of our senior
managers attend management skills training, as a team, three times per year.
My advisers comprise a small team who advise me with regard to any aspect of the use of our IP, licensing and product strategy. To help
me stay focused on executing my key day to day duties I have arranged a consultancy agreement with Tom Kirby to support me with our
Academy programme and our expansion in Asia.
4 Games Workshop Group PLC
Key performance indicators
The board and management team use a number of key performance indicators to provide a consistent method of analysing performance,
in addition to allowing the board to benchmark performance against our forecast. The key performance indicators utilised by the board can
be split into key financial performance indicators and key non-financial performance indicators.
The key financial performance indicators are:
Moving Annual Total (‘MAT’) sales growth by channel
Measures the sales growth achieved in each of our channels on a rolling 12 month basis.
MAT Group gross margin
Measures the gross profit achieved on sales after taking account of the direct costs and depreciation of manufacturing and shipping our
product to customers/stores on a rolling 12 month basis.
MAT core business profit
Measures gross profit less operating expenses on a 12 month rolling basis, before royalty income.
MAT number of own stores by territory
Measures the number of our own stores on a rolling 12 month basis. This is an indicator of our global reach.
MAT number of ordering stockist accounts by territory
Measures the number of trade outlets that have ordered from us in the last three months. It is an indicator of our global reach and the
health of our trade account base.
The key non-financial indicators are:
Product quality
This is an indicator of the effectiveness of our design studio and our continuous improvement in design to manufacture. We measure this
by looking at sell through. If the product is great we sell a lot, if not we sell very few.
Outstanding customer service
This is an indicator of the effectiveness and efficiency of the service experience customers get in our stores and the time it takes us to
resolve a customer query made to our customer service teams. The former is measured by the number of complaints I receive - very few -
and the latter is tracked by five micro KPIs. Our approach is that ‘the customer is always right’ and we do our utmost to resolve successfully
any issues.
Shareholder value
We believe shareholder value is created, primarily, by not destroying it. We have no intention to acquire other companies, nor to dispose
of any of those we own.
We return our surplus cash to our owners and try to do so in ever increasing amounts.
Graph of our shareholder value
Share price
Dividend
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a
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p
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p
900
800
700
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400
300
200
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0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Shareholder value for this graph is calculated as the price of the shares at year end plus the dividend per share paid in the year.
5 Games Workshop Group PLC
STRATEGIC REPORT continued
Review of the year
Over the year we have seen modest sales growth, at constant currency, in our core trade and mail order channels. We saw a small sales
decline in our own stores due to continued difficult trading in Continental Europe following our restructuring last year. We saw expected
declines in some non-core activities (described below) that are grouped with core activities in our reporting. The effect of these non-core
activities and the continuing effects of unfavourable exchange rates mean that our reported sales show declines in retail (-4.6%) and trade
(-6.3%). Mail order growth was 3.9%.
It is encouraging to see that the channels and territories not impacted by our restructuring last year delivered sales growth, namely, mail
order, trade in North America, Australia and New Zealand and retail in the UK, Australia and New Zealand.
The restructuring across Continental Europe was delivered on time, within budget and has delivered the cost savings that were planned.
We anticipated - correctly - that it would take some time to get this region back to its normal levels as we knew we would have to recruit a
new trade team of recruiters and account developers in Nottingham servicing all of Continental Europe in the local languages. In the
second half that new team delivered sales growth of 1%. The impact in retail has taken a little longer than planned to recover. The key
issue is store manager recruitment, which remains a key priority.
The exit of loss making stores in North America has been a challenge; we closed nine stores in the year and as a direct result have not
delivered a net increase in stores in North America in the year. This project is now complete and, subject to finding the right managers, we
will be embarking on a store opening programme in North America in 2015/16.
We expected a decline in non-core trade activities (-£2.2 million) and this comprised export, non-strategic accounts and magazine sales via
newsstand. The decline of non-core retail of £0.7 million is due to the redevelopment of the visitor centre in Nottingham. We aim to offset
this sales decline in 2015/16 with the opening of our new visitor centre and our new events programme. We are all very proud of the new
venue, which opened on time and on budget in May 2015. It is a great example of our staff working together to deliver a project
successfully.
Gross margin declined in the period due to a decline in sales volumes and increased development costs due to the release of more new
products. The quality of new product we release continues to surprise and delight our customers and we plan to do so every week. We
have increased the prices of our new releases to reflect the additional investment and value we have built into these new releases. The
annual impact of this increase on our UK RRP price list is an average increase of 3%.
Costs have been reduced in the year, mainly as a result of the savings delivered from restructuring in Continental Europe, the exit of high
cost stores in North America and the way in which we maintain cover staff for our UK stores.
I have set a goal of getting the business into sales growth in 2015/16 and have asked staff to accept a salary freeze until December 2015 to
allow us to maintain our cost to sales ratio. If we deliver sales growth in the first half of 2015/16 I have agreed to back date any salary
reviews to 1 June 2015. We are all working hard to deliver this goal.
Warhammer branding
We have taken the decision in the year to rebrand our stores ‘Warhammer’. It is what our customers call us. This will be rolled out
progressively, as and when we open new or refurbish our existing stores. At the year end we had 13 Warhammer branded stores.
Product
In July 2015, we relaunched Warhammer Fantasy to broad acclaim ‘Warhammer: Age of Sigmar’. We are so proud of this new range of
miniatures that we have commissioned an additional statue at our HQ to complement our Space Marine, which has delighted our
customers and staff for the last 17 years. You have to see it to believe it, you will not be disappointed.
Licensing
In the period we signed 17 new deals and have 44 contracts currently in place to produce more than 50 interactive products. Reported
income is split: 52% traditional PC games, 27% mobile and 21% card, board and role-playing game licences. 37 new products were released
in the period. We also announced a major tie up with SEGA to develop a real time strategy game ‘Total War: Warhammer’.
Projects
We have three major projects being implemented currently:
European ERP - enterprise resource planning (core back office systems) - replacement. It is estimated to cost £6.4 million.
Forge World mail order store. To protect our sales we are building a new Forge World mail order store on the same platform and
hosting environment as our Citadel mail order store and migrating all products and imagery. It is on track with a scheduled go live
date in the summer of 2015. It will cost £1.1 million.
Mail order warehouse system replacement. It is estimated to cost £0.8 million.
6 Games Workshop Group PLC
Return on capital*
%
70
60
50
40
30
20
10
0
24
10
5
11
59
46
46
37
42
40
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Our key measure of our performance is return on capital. During the year our return on capital fell from 42% to 40%. This was driven by
both a decline in operating profit and an increase in capital employed.
Sales
Reported sales fell by 3.5% to £119.1 million for the year. On a constant currency basis, sales were down by 0.3% from £123.5 million to
£123.1 million; split by channel this comprised: retail £50.8 million (2014: £52.0 million), trade £46.2 million (2014: £46.9 million) and mail
order £26.1 million (2014: £24.6 million).
Operating profit
Core business operating profit (operating profit before royalty income) fell by £0.4 million to £15.0 million (2014: £15.4 million). On a
constant currency basis, core business operating profit increased by £2.2 million to £17.5 million. This was driven by a reduction in
operating expenses excluding exceptional items.
Operating expenses (excluding exceptional items) fell by £4.2 million; £1.8 million due to a reduction in retail store costs and savings of
£2.4 million from the restructure of Continental Europe have been realised. Costs remain a key area of focus.
Capital employed
Average capital employed* increased by £2.0 million to £38.6 million. The book value of tangible and intangible assets increased by £1.3
million whilst trade and other receivables decreased by £0.2 million, inventories fell by £0.4 million and current liabilities fell by £1.3
million.
Cash generation
During the year, the Group’s core operating activities generated £20.3 million of cash after tax payments (2014: £17.9 million). The Group
also received cash of £3.0 million in respect of royalties in the year (2014: £2.4 million). After purchases of tangible and intangible assets
and product development costs of £12.4 million (2014: £11.7 million) and dividends of £16.6 million (2014: £5.1 million) there were net
funds at the year end of £12.6 million (2014: £17.6 million).
The chart below shows a bridge of operating profit to cash generated.
Bridge of operating profit to cash generated
+£11.1m
-£12.3m
-
-£2.3m
-£2.3m
+£1.0m
£M
30.0
25.0
20.0
15.0
10.0
5.0
-
Operating profit Depreciation and
amortisation
Investments in
assets
Tax paid
Changes in
working capital
Other
Cash generated
pre distribution
*We use average capital employed to take account of the significant fluctuation in working capital which occurs as the business builds both inventories and trade receivables in the
pre-Christmas trading period. Return is defined as pre-exceptional operating profit before royalty income, and the average capital employed is adjusted by deducting assets and
adding back liabilities in respect of cash, borrowings, exceptional provisions, taxation, deferred royalty income and dividends.
7 Games Workshop Group PLC
STRATEGIC REPORT continued
Investments in assets
This is what we have been spending your money on:
Shop fits for new and existing stores
Production equipment and tooling
Computer equipment and software
Lenton site including the new visitor centre
Total capital additions
2015
£million
0.8
3.0
1.6
2.4
7.8
2014
£million
1.1
2.8
2.7
0.5
7.1
In 2014/15 we invested £0.8 million in shop fits: 34 new stores and three refurbishments. We also invested £3.0 million in tooling, milling
and injection moulding machines. Capital investment is expected to be higher than depreciation and amortisation over the next few years
as we upgrade our core back office systems in Nottingham.
Dividends
We followed our principle of returning truly surplus cash to shareholders. Dividends of 52 pence per share were paid during the year (£16.6
million; 2014: £5.1 million).
Royalty income
Royalty income increased in the period by £0.1 million to £1.5 million.
Taxation
The tax rate for the year was 26.1% (2014: 32.0%). We continue to expect a rate above that for business activities based solely in the UK,
due to higher overseas tax rates.
Sales by channel
42% (2014: 42%) of sales were made through our own stores, 37% (2014: 38%) of sales were to independent retailers and 21% (2014: 20%)
mail order.
Mail order 21%
Own stores 42%
Trade 37%
Retail
Store openings and closures during the year
UK
North America
Europe
Australia
Asia
Number of stores
at May 2014
142
87
141
40
4
414
Opened
10
6
10
7
1
34
Closed
(10)
(9)
(6)
(4)
(1)
(30)
Number of stores
at May 2015
142
84
145
43
4
418
Number of one man
stores at May 2015
108
72
105
36
3
324
Number of one man
stores at May 2014
103
63
99
29
3
297
We relocated 15 stores and these are included in the opened/closed movement above. Our ability to open new stores is still (and always
will be) limited by our ability to find the right people to run them. Although we are getting better at it, it is still our number one priority.
Retail sales fell by 4.6% in the year (-2.2% at constant currency), partially due to the continental european reorganisation as well as a
decline in non-core retail sales relating to the refurbishment of the visitor centre in Nottingham.
8 Games Workshop Group PLC
Trade
Sales fell by 6.3% in the year (-1.6% at constant currency), partially due to the continental european reorganisation and decline in non-core
trade sales.
Mail order
Our new online shop was launched in April 2014 and our online sales in the period were 3.9% higher than the prior year (+5.9% at constant
currency).
Treasury
The objective of our treasury operation is the cost effective management of financial risk. The relationship with the Group’s bank is
managed centrally. It operates within a range of board approved policies. No transactions of a speculative nature are permitted.
Funding and liquidity risk
The Group pays for its operations entirely from our cash flow. We had a small facility at the bank which expired in December 2014.
Interest rate risk
Net interest receivable for the year (excluding net foreign exchange gains and unwinding of discounts on provisions) was £109,000 (2014:
£106,000).
Foreign exchange
Our big currency exposures are the euro and US dollar:
Year end rate used for the balance sheet
Average rate used for earnings
euro
US dollar
2015
1.39
1.31
2014
1.23
1.20
2015
1.53
1.58
2014
1.68
1.62
The net impact in the year of these exchange rate fluctuations on our operating profit was a reduction of £2.5 million (2014: reduction of
£1.3 million).
Gender diversity, greenhouse gases, social, community and human rights, and employees
We report on these topics in the directors’ report on pages 13 to 14.
Priorities for next year
As part of our overall strategy, four key strategic initiatives will be prioritised in 2015/16. These are designed to deliver sales growth whilst
maintaining our gross margin and keeping our costs flat.
Firstly, staff recruitment. We need a constant stream of new people to join Games Workshop across all departments and over the last
three years our Academy team has been training us all on how to find people whose personal qualities fit the jobs we need to fill. This has
radically changed how we recruit and also how we performance manage; to date our new approach has proven to be successful. The
challenge now is how do we deal with our recruitment process on an industrial scale: globally we recruit hundreds of people every year and
our rigorous approach means that to do this successfully we need to consider thousands of application letters. To help us in this process I
will be adding an expert in recruitment to my management team. This appointment should help ensure Games Workshop has the right
processes in place to recruit the people we need when we need them to deliver our growth.
Secondly, I will review our product range. We believe this is long overdue: it is time for a resetting of the ranges. Not tweaking here and
there but a top down reassessment. I expect to update you further at the half year. We will aim to continue to deliver outstanding product
and customer service, maintain our Group gross margin and continue to improve our Group stock turn. To be absolutely clear I will not be
reducing the RRP of our products: they are premium priced for their premium quality. I will, however, be looking to offer a broader range
of price points. This is exciting and is for the long term, so I'm not promising when you will see a change. We have already started the
brainstorming in our monthly strategic product meetings. It is early days, but I can already foresee some busy times ahead.
Thirdly, we must grow the number of customers we have. We have been underperforming here in recent years, mainly on account of our
focus on the value based initiatives of converting our loss making stores to profitable ones and restructuring our sales businesses to take
out duplicate and unnecessary costs. My aim is to:
1. Open more of our own stores, mostly in our proven one man store format, in greenfield cities in North America and Continental Europe.
Our retail sales managers all have ambitious goals for 2015/16. I am also working closely with our manager for Asia to open more stores in
Japan, Singapore and Hong Kong. We do believe we can establish our Hobby business in Asia, but this isn't going to happen overnight. My
global goal is to open 30 stores (net) in 2015/16. If we achieve our first initiative it may well be many more.
9 Games Workshop Group PLC
STRATEGIC REPORT continued
Priorities for next year continued
I'm also proposing a trial in a few high footfall locations, like the one we opened in April 2015 on Tottenham Court Road, London. It is a
multi-man format store with an extended (more expensive) shop fit: mainly new till format, mobile tills, better use of merchandising space,
new web terminal (to access our broader range) and next day stock delivery to the store for in-store orders. The store has been branded
‘Warhammer’ instead of ‘Games Workshop’. I believe that this store format can support the additional investment as such stores are
uniquely placed to service a higher number of customers, often lots of tourists. My aim is to pilot, on a smaller scale, one each in Boston,
Sydney, Munich, Paris and Copenhagen in the year ahead. I don't intend to move our overall retail strategy away from one man stores;
these will be exceptional stores. The only differences to our one man store format will be the additional rent and property related costs
and the additional capital investment. We can flex the staffing levels.
2. Open more stockist trade accounts using our proven stockist strategy. This will be based on our well established terms and conditions,
selling independent accounts our best selling products and, where appropriate, the extended range. Our global trade manager has some
ambitious plans to grow the net number of trade outlets we have, with a particular focus on North America.
3. Explore new core trade opportunities in toy, craft, book and comic stores. This has always been a great opportunity to extend our reach
and help us find new customers. I am working closely with my advisers exploring these types of locations.
Finally, we will be replacing the European ERP system in Nottingham that we have been using for over 15 years: it has come to the end of
its useful life. This project will give us the opportunity to drive synergies throughout our back office functions by removing complexity, re-
engineering our processes and delivering our services at a lower cost. Following a lengthy and robust process we have now chosen the
product and the vendor. As a result our capital investment is likely to be higher over the next few years. The total cost of this project,
including internal resources, is estimated to be £6.4 million.
Risks and uncertainties
The board has overall responsibility for ensuring risk is appropriately managed across the Group. The top five risks to the Group are
reviewed at each board meeting. The risks are rated as to their business impact and their likelihood of occurring. In addition, the Group has
a disaster recovery plan to ensure ongoing operations are maintained in all circumstances. The principle risks identified in 2014/2015 are
discussed below. These risks are not intended to be an extensive analysis of all risks that may arise but more importantly the ones that
would cause business interruption in the year ahead. The financial risks impacting the Group are detailed on page 52.
ERP change - as discussed above we are changing our core ERP system in the UK. This is a complicated project with the risk of widespread
business disruption if it is not implemented well.
Store manager recruitment – this comprises both recruitment of managers for new stores as well as replacing poor performing managers.
Retail is our primary method of recruiting new customers and so we need great managers in all our stores.
Supply chain – as discussed above we are currently changing our mail order warehouse system. This is part of an ongoing programme of
continuous improvement for these warehouse systems. As with any system change there are risks associated with the transition.
Range management – as discussed above we are reviewing our range to ensure that we are exploring all opportunities. The risk is that we
don’t fully exploit all the opportunities that are available to us.
Distractions – this is anything else that gets in the way of us delivering our goals.
In my opinion the greatest risk is the same one that we repeat each year, namely, management. So long as we have great people we will be
fine. Problems will arise if the board allows egos and private agendas to rule. I will do my utmost to ensure that this does not happen on
my watch.
Summary
We have all been working hard this year, made some good progress and honoured our commitment to distribute genuinely surplus cash to
our shareholders. That commitment isn't going to change.
Since being appointed CEO, I believe I have hit the ground running and not dropped too many balls. I am delighted that my team has
responded well to the new CEO. We are working well together, are looking very lively - and with the launch of Warhammer: Age of Sigmar
having some fun too.
We are confident we can achieve the priorities I have set for 2015/16. I will keep you appropriately informed.
The board continues to believe that the prospects for the business are good.
Kevin Rountree
CEO
27 July 2015
10 Games Workshop Group PLC
DIRECTORS’ REPORT
The directors present their annual report together with the financial statements and independent auditors’ report for the year ended 31
May 2015.
General information
Games Workshop Group PLC (the ‘Company’) and its subsidiaries (together the ‘Group’) designs and manufactures miniature figures and
games and distributes these through its own network of retail stores, independent retailers and direct via the internet and mail order. The
Group has manufacturing activities in the UK and sells mainly in Continental Europe, North America and Asia Pacific.
The Company is a public listed company, incorporated and domiciled in the United Kingdom. The address of its registered office is Willow
Road, Lenton, Nottingham, NG7 2WS, United Kingdom. The Company’s ordinary share capital is listed on the London Stock Exchange.
Substantial shareholdings
The following interests in 3% or more of the issued share capital of the Company as at 24 July 2015 have been disclosed to the Company:
Ruffer LLP
Investec Asset Management Limited
Massachusetts Financial Services Company
Phoenix Asset Management Partners Limited
Legal & General Group plc
Schroders plc
Aberforth Partners LLP
Artemis Investment Management LLP
FIL Limited
No. of shares
3,225,596
3,087,765
2,044,385
1,865,218
1,683,901
1,677,861
1,636,300
1,620,001
1,516,682
%
10.1
9.6
6.4
5.8
5.3
5.2
5.1
5.1
4.7
The Company has not been notified of any other substantial shareholdings other than those of the directors, which are disclosed in the
remuneration report on page 27.
Dividends
Dividends of 52 pence per share (2014: 16 pence) were paid during the year (£16.6 million; 2014: £5.1 million).
Directors
The present directors of the Company are listed on page 29. All of the directors were members of the board throughout the year and up to
the date of signing the financial statements with the exception of R F Tongue, who was appointed a director with effect from 1 January
2015.
Under the Company’s articles of association one third of the directors are required to retire by rotation at each annual general meeting.
Those who retire are the longest in office since their election or last re-election. Under this formula, at this year’s annual general meeting,
no directors require rotation. R F Tongue, however, will be seeking her election since appointment to the board in January 2015. In
addition, as a result of their long service, non-executive directors T H F Kirby, C J Myatt and N J Donaldson are required to retire and are
seeking re-election. In relation to the non-executive directors, the chairman has confirmed that, following formal performance evaluation,
the performance of C J Myatt and N J Donaldson continues to be effective and they continue to demonstrate commitment to their roles as
non-executive directors, including commitment of the necessary time to board and committee meetings and other duties. C J Myatt and
N J Donaldson are considered by the board to be independent of the Group, as set out in the corporate governance report. T H F Kirby is
not considered independent of the Group given his previous executive roles within the Company.
Directors' interests
The interests of the directors in the shares of the Company, together with details of share options granted to the directors, are disclosed in
the remuneration report on page 27. None of the directors had a material interest in any contract of significance to which the Company, or
any of its subsidiaries, was a party during the year.
Directors’ indemnities
The Company has made qualifying third party indemnity provisions for the benefit of its directors, as permitted by section 234 of the
Companies Act 2006, which were in force during the year and up to 27 July 2015.
Information on executive directors
K D Rountree (age 45), CEO. Kevin Rountree joined Games Workshop in March 1998 as assistant group accountant. He then had various
management roles within Games Workshop, including head of sales for the Other Activities division (including Black Library, licensing and
Sabertooth Games). Kevin was appointed CFO in October 2008. During the year ended 29 May 2011, he took on the responsibility of
managing the Group’s service centres globally. To reflect this, his title was changed to chief operating officer from chief financial officer. He
became chief executive on 1 January 2015. He qualified as a chartered management accountant in August 2001. Prior to joining Games
Workshop, Kevin was the management accountant at J Barbour & Sons Limited and trained at Price Waterhouse.
11 Games Workshop Group PLC
DIRECTORS’ REPORT continued
Information on executive directors continued
R F Tongue (age 44), group finance director and company secretary. Rachel joined Games Workshop in September 1996 as group tax
manager. She then had various accounting roles within Games Workshop and was appointed company secretary in October 2008. She has
also managed the legal and compliance functions within Games Workshop from November 2012. She was appointed group finance director
in January 2015. Rachel qualified as a chartered accountant in 1995 and as a chartered tax adviser in 1996 having trained with Arthur
Andersen.
Information on non-executive directors
T H F Kirby (age 65), non-executive chairman. Tom Kirby joined Games Workshop in April 1986 as general manager and led the
management buy-out in December 1991, becoming chief executive at that time. Between 1998 and 2000 he took on the role of non-
executive chairman, returning to the role of chief executive in September 2000. He performed the role of chairman from December 2007
to January 2013 when he became chairman and acting CEO. Following the appointment of Kevin Rountree as CEO with effect from 1
January 2015, Tom became non-executive chairman of the Group. Prior to joining Games Workshop, Tom worked for six years for a
distributor of fantasy games in the UK and was previously an inspector of taxes.
C J Myatt (age 71). Chris Myatt is the senior independent director, joining the board on 18 April 1996. He was formerly managing director
of a division of Tarmac PLC, chairman and non-executive director of a number of manufacturing companies and treasurer of Keele
University.
N J Donaldson (age 61). Nick Donaldson was appointed to the board on 18 April 2002. A barrister by profession, Nick is a partner of London
Bridge Capital Limited. Nick was, until 2003, head of corporate finance at Arbuthnot Securities Limited and previously held senior
investment banking positions at Robert W Baird Limited and at Credit Lyonnais Securities. He is chairman of DP Poland PLC and a director
of The Fulham Shore plc.
E O’Donnell (age 44). Elaine O’Donnell was appointed to the board on 28 November 2013. A chartered accountant by profession, until
recently Elaine was a corporate finance partner with EY. She is also a non-executive director/trustee of The Manufacturing Institute.
Auditors
As at 27 July 2015, so far as each director is aware, there is no relevant audit information of which the auditors are unaware and each
director has taken all steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit
information and to establish that the auditors are aware of that information.
Share capital, share rights and other information
As at 24 July 2015, the Company’s authorised share capital was £2,100,000 divided into 42,000,000 ordinary shares of 5p each nominal
value (‘ordinary shares’). On 24 July 2015 there were 32,063,812 (2014: 31,860,894) ordinary shares in issue. These ordinary shares are
listed on the London Stock Exchange. All ordinary shares rank equally with respect to voting rights and the right to receive dividends.
Shares acquired through the Company’s share schemes rank pari passu with the shares in issue and have no special rights. The holders of
ordinary shares are entitled to receive the Company’s annual report, to attend and speak at general meetings of the Company, to appoint
proxies and to exercise voting rights. There are no restrictions on transfer or limitations on the holding of any class of share and no
requirements for prior approval of any transfers. The directors may refuse to register a transfer of shares if there is a failure to comply with
certain requirements of the Company’s articles of association. None of the shares carries any special rights with regard to control of the
Company.
In accordance with the Company’s articles of associations, each share (other than those held in treasury) entitles the holder to one vote at
general meetings of the Company on votes taken on a poll. On a show of hands at a meeting, every member present in person or by one or
more proxies and entitled to vote has one vote. Unless the directors decide otherwise, if a shareholder is given notice that he has failed to
provide information required in relation to any shares pursuant to a notice under section 793 of the Companies Act 2006, that member will
be unable to vote on those shares both in a general meeting and at a meeting of the shareholders of that class. If such shareholder holds
more than 0.25% of the issued shares of a class (excluding treasury shares) and is in default of a section 793 notice, the directors may also
state in the notice that: (i) the payment of any dividend shall be withheld; and (ii) that there can be no transfer of the shares held by such
shareholder.
Subject to the provision of law, the Company may by ordinary resolution declare a dividend to be paid to the members according to their
respective rights and interest, but no dividend may exceed the amount recommended by the directors. The directors may also declare and
pay interim dividends. Subject to shareholder approval, the directors may pay dividends by issuing shares credited as fully paid up in lieu of
cash dividends. If dividends remain unclaimed for 12 years they are forfeited and revert to the Company.
A director appointed by the board holds office only until the next annual general meeting (‘AGM’). At each AGM one third of the directors
will retire by rotation and be eligible for re-election. The directors to retire will be those who wish to retire and those who have been
longest in office since their last appointment or re-appointment.
12 Games Workshop Group PLC
Share capital, share rights and other information continued
The rules about the appointment and replacement of directors are contained in the Company’s articles of association. The Company’s
articles of association state that a director may be appointed by an ordinary resolution of the shareholders or by the directors, either to fill
a vacancy or as an addition to the existing board but so that the total number of directors does not exceed the maximum number of
directors allowed pursuant to the Company’s articles of association. The Company’s articles of association do not currently specify a
maximum number of directors. The Company may by ordinary resolution remove a director from the board of directors.
The Company’s articles of association also state that the board of directors is responsible for the management of the business of the
Company and in doing so may exercise all the powers of the Company subject to the provision of relevant legislation and the
Company’s constitutional documentation. The powers of the directors set out in the Company’s articles of association include those in
relation to the issue and buy-back of shares.
Changes to the articles of association must be approved by the shareholders in accordance with the legislation in force from time to time.
As at 31 May 2015, the Company had an unexpired authority to repurchase shares up to a maximum of 4,747,273 shares. During the year
no shares were purchased in the market for cancellation.
The Company does not have agreements with any director or employee that would provide compensation for loss of office or employment
resulting from a takeover, except that the provisions of the Company’s sharesave scheme may cause options to be exercised on a takeover.
Constructive use of the annual general meeting
The chairmen of the audit, the City and the remuneration and nomination committees will be available to answer questions at the annual
general meeting. Separate resolutions are proposed for substantially separate issues at the meeting and the chairman of the Company will
declare the number of proxy votes received both for and against each resolution.
Corporate governance
The Company’s statement on corporate governance is included in the corporate governance report on pages 16 to 19.
Conflicts of interest
The Company’s articles of association take account of certain provisions of the Companies Act 2006 relating to directors’ conflict of
interest. These provisions permit the board to consider and, if thought fit, to authorise situations where a director has an interest that
conflicts, or may possibly conflict, with the interest of the Company. The board has adopted procedures for the approval of such conflicts.
The board’s powers to authorise conflict are operating effectively and the procedures are being followed.
Health, safety and environment
Games Workshop is fully committed to the safety of its customers and the safety, health and wellbeing of its employees. Our people are
our most valuable asset. We care about our colleagues and want to look after them.
Following the appointment of a new global health and safety manager in October 2014, it was identified that Games Workshop’s health,
safety and environmental (‘HSE’) strategy should be co-ordinated in a more centralised way, and applied in a more consistent manner
throughout our operations around the world. We are currently working on a global HSE system to achieve consistency throughout Games
Workshop. This will involve the development of a set of global standards which will form the basis of a global HSE strategy designed to
ensure the safety and wellbeing of our customers and employees across the globe.
Injury reporting
During the year there were four injuries (2014: 2) reported under the Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations (RIDDOR) 2013 in the UK and three injuries (2014: 2) reported to the US Occupational Safety and Health Administration.
Greenhouse gas emissions
Under the Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013, enforced under the Companies Act 2006, we have addressed
our Greenhouse Gas (‘GHG’) reporting requirements.
We have used the methodology described in the Environmental Reporting Guidelines from DEFRA to identify our GHG inventory of Scope 1
(direct) and Scope 2 (indirect) global CO2 emissions. We have considered the six main GHGs and report in CO2 equivalent. Our data includes
all manufacturing, office and retail sites controlled globally by Games Workshop. All calculations have used the 2013 DEFRA conversion
factors.
Scope 1 covers activities owned or controlled by Games Workshop that release emissions straight into the atmosphere – gas
boilers, vehicle operation, air conditioning.
Scope 2 covers activities that that are not owned or controlled by Games Workshop but create emissions as a result of our activities
– electricity consumption.
Scope 1 – tonnes CO2e
Scope 2 – tonnes CO2e
Total tonnes CO2e
Tonnes CO2e per sq metre
Tonnes CO2e per £000 of revenue
13 Games Workshop Group PLC
2015
685
4,579
5,264
0.083
0.044
2014
767
4,421
5,188
0.082
0.042
DIRECTORS’ REPORT continued
Greenhouse gas emissions continued
This is the second year of reporting and as per the regulations we have included the emissions reported in our previous annual report for
the purposes of comparison.
The methodology for calculating emissions from our european operations has been altered for the 2014/15 reporting year in-line with
changes to the business structure.
Waste management
In 2014/15 we sent 64% of our waste by weight from our Nottingham site for re-use or recycling (2014: 70%). 36% of our waste was sent
for heat recovery at the Nottingham City Council incinerator (2014: 30%).
Nottingham Workplace Parking Levy and travel to work
Games Workshop will continue its policy of not recharging employees the Workplace Parking Levy (which increased by 2% in April 2015 to
£375 per year for each used workplace parking space). We continue to promote our cycle to work scheme and have a high ratio of cyclists
(over 10% of employees) at our Nottingham site.
Employees
The Group's policy is to consult on and discuss with employees, at meetings, matters likely to affect employees' interests. Information on
matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the
part of all employees of the financial and economic factors affecting the Group's performance.
The Group operates an employee sharesave scheme as a means of further encouraging the involvement of employees in the Group's
performance.
The Group's policy is to consider, for recruitment, disabled workers for those vacancies that they are able to fill. All necessary assistance
with training courses is given. Once employed, a career plan is developed so as to ensure suitable opportunities for each disabled person.
Arrangements are made, wherever possible, for retraining employees who become disabled, to enable them to perform work identified as
appropriate to their aptitudes and abilities.
Diversity
The board has noted the changes to the UK Corporate Governance Code (the ‘Code’) announced by the FRC in October 2011 to strengthen
the principle of boardroom diversity, which was first introduced into the Code in June 2010. The Company supports the provision that
boards should consider the benefits of diversity, including gender, when making appointments and is committed to ensuring diversity, not
just at board level but also throughout the workforce. The board believes that business benefits from the widest range of perspectives and
backgrounds. The Company’s aim as regards composition of the board is that it should have a balance of attitudes and knowledge to
enable each director and the board as a whole to discharge their duties effectively. The Company does not consider that diversity can be
best achieved by establishing specific quotas and targets and appointments will continue to be made based on merit.
As at 31 May 2015, the workforce is comprised as follows:
The board
Senior management
Total workforce
Male
4
5
1,369
Female
2
1
285
Total
6
6
1,654
Social, community and human rights
The Group has policies that encompass a set of global sourcing principles covering fair terms of employment, human rights, health and
safety, equal opportunities and good environmental practice. We seek to work with suppliers who adopt an ethical approach to human
rights, working conditions and the environment in line with our own values. Our buyers are required to review supplier compliance with
these policies, identify any areas of non-conformance and take action where appropriate. The Group monitors the quality and availability
of all sourced components to ensure high standards are maintained.
Employees continue to carry out fund raising events for their chosen charities. Although we have decided that we will no longer make cash
donations to charities, we are fully supportive of the work our employees do.
Research and development
The Group does not undertake research activities. Development activities relate to the development of new product lines. The charge to
the income statement for the year in respect of development activities is detailed in note 9 to the financial statements.
Future developments
The future developments for the Group are discussed in the strategic report on pages 9 and 10.
14 Games Workshop Group PLC
Going concern
After making appropriate enquiries, the directors have a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in
preparing the Group’s and Company’s financial statements.
By order of the board
R F Tongue
Group finance director and company secretary
27 July 2015
15 Games Workshop Group PLC
CORPORATE GOVERNANCE REPORT
The Listing Rules of the Financial Conduct Authority require listed companies to disclose, in relation to section 1 of the UK Corporate
Governance Code 2012 (the ‘Code’), how they have applied its principles and whether they have complied with its provisions throughout
the accounting period. The UK Corporate Governance Code can be found at www.frc.org.uk.
This statement, together with the remuneration report on pages 20 to 27, explains how the Company has applied the principles and
complied with the provisions set out in the Code.
The board operates through monthly meetings which senior executives attend on a regular basis. Major strategic decisions and the
approval of any significant capital expenditure are reserved for decision by the board. The board is updated about operational decisions
through the monthly meetings. Terms of reference for the board committees (as set out below) are available on the Company’s website.
A review of the performance of the Group’s main business activities are included in the strategic review. The board presents this review,
together with the directors’ report on pages 11 to 15, to give a fair, balanced and understandable assessment of the Group’s position and
prospects.
The board
The board comprises the chairman, the CEO, the group finance director and three non-executive directors following the appointment of R F
Tongue during the year. It is chaired by the chairman, T H F Kirby. This arrangement does not comply with provision A.3.1 of the Code as
T H F Kirby did not meet fully the independence criteria set out in the Code as he was formerly the Company’s acting CEO and also in
providing ongoing consultancy services. In addition, for the first seven months of the year, T H F Kirby was chairman and acting CEO. This
arrangement does not comply with provision A.2.1 of the Code, which states that the roles of chairman and chief executive should not be
exercised by the same person.
The senior independent director is C J Myatt. His principal responsibilities include:
to be available to shareholders if they have concerns which contact through the normal channels of the chairman, the
CEO or the group finance director, has failed to resolve, or for which such contact is not appropriate
to ensure that the performance evaluation of the chairman is conducted effectively
The three non-executive directors (excluding the chairman) have a breadth of successful commercial and professional experience and are
considered by the board to be independent of the Group. The Code states that the board should identify each non-executive director it
considers to be independent, and the Code then lists various circumstances which may appear relevant to its determination. This includes
(amongst others) if the director has served on the board for more than nine years.
At Games Workshop the board has had to confront one of these circumstances as two of the non-executive directors, C J Myatt and N J
Donaldson, have served for more than nine years.
In making this assessment as to independence, the board has taken into account the personal attributes of each director in relation to the
current and future needs of the board. In the opinion of the board, independence (like judgement and wisdom) is not an attribute which
can be measured by reference to a checklist. It is rather an attribute which the members of the board can observe being demonstrated by
a director in his actions and interactions with other members of the board as it faces the various issues which are placed before it.
Independence is the absence of complacency, lazy thinking and acceptance of the status quo.
Regarding the specific Code circumstance of service of over nine years, the board’s position is as follows:
The ‘nine year rule’ is a helpful guide to the risk of directors becoming ‘stale’. The board considers this risk periodically, but has not yet
found it to be an issue at Games Workshop. If it did, it would react accordingly. At present the board feels that the requirement for
members of the board to have a real understanding of, and empathy with, the Games Workshop Hobby to be a point in favour of retaining
the experience which the board currently has.
Based upon its assessment, which focuses on each director’s attitude towards making his best contribution to the progress of the
Company, the board considers that both of these non-executive directors are independent.
The board operates primarily through its monthly meetings and is responsible for leading and controlling the Group and monitoring
executive management. It meets at least nine times a year. In 2014/15 the board had 10 scheduled meetings, each of which was attended
by all members of the board.
All directors bring an independent judgement to bear on issues of strategy, performance, resources (including key appointments) and
standards of conduct. The board considers that it has been supplied with sufficient timely and accurate information to enable it to
discharge its duties.
16 Games Workshop Group PLC
The board continued
All members of the board have access to the services and advice of the company secretary. There is a procedure for directors to take
independent professional advice at the Company's expense where relevant to the execution of their duties. The executive directors attach
great importance to ensuring that the non-executive directors are provided with accurate, timely and clear information on the Group. In
addition, the non-executive directors are actively encouraged to update continually their knowledge of and familiarity with the Group and
the issues affecting it, so as to enable them to fulfil effectively their roles on both the board and its committees.
The board has established a process for the ongoing assessment of its own performance and that of its committees. The board has
completed an internal review process to determine and define the role that the board performs; an internal assessment has been
undertaken to review the board’s performance against those objectives and this will continue in 2015/16. This will be an iterative process
which will inform the board’s development agenda on a regular basis.
Board committees
The board has three principal committees, all with written terms of reference which are published on the Company’s website and which
are available on application to the company secretary at the Company’s registered office. The company secretary serves as secretary to all
three committees. The chairmen of the audit, the City and the remuneration and nomination committees will be available to answer
questions at the Company’s annual general meeting.
Audit committee
The audit committee comprises the three non-executive directors and the chairman under the chairmanship of C J Myatt, who is a
chartered management accountant and has significant relevant financial and accounting knowledge and experience. The audit committee’s
terms of reference include monitoring the appropriateness of accounting policies, financial reporting, internal control and risk assessment
and keeping under review the scope, results and effectiveness of the external and internal audits and the independence of the Company’s
external auditors.
Significant issues considered by the audit committee
The committee had six meetings during the year which were attended by all members of the committee. It has an agenda linked to the
events in the Group’s financial calendar. The external auditors met with the committee without management being present and the
chairman and members of the committee have direct contact with the audit partner as required. During the year the committee:
•
•
•
•
•
•
•
•
reviewed the half-year and full-year results
received and considered, as part of the review of the annual financial statements, reports from the external auditors in respect of
the auditors’ review of the audit plan for the year and the results of the annual audit. These reports included the scope of the
annual audit, the approach adopted by the auditors to address and conclude upon key estimates and other key audit areas, the
basis on which the auditors assess materiality, the terms of engagement for the auditors and an ongoing assessment of the impact
of future accounting developments on the Group
considered whether the annual report is fair, balanced and understandable. In doing so, the committee reviewed and discussed
with management the content and appropriateness of the information included within the 2015 annual report. This provided the
committee with the supporting detail to ensure that it was in a position to report to the board that the 2015 annual report taken as
a whole was fair, balanced and understandable. This was on the basis that the business description, business model and strategy
agreed with its own understanding of the Group, and the balance in the reporting of performance reflected both positive and
negative issues and reflected the Group’s activities during the year
ran a tender process for the provision of audit services to the Group
considered the effectiveness and independence of the external auditors and made a recommendation to the board regarding the
re-appointment of PricewaterhouseCoopers LLP as external auditors
reviewed the Company’s policy on non-audit fees and ensured appropriate safeguards are in place
considered and agreed the internal audit work programme and received regular reports on the key issues arising from its
implementation during the year
reviewed reports on the key business risks, including a review of the internal control processes used to identify, monitor and
mitigate the principal risks and uncertainties
The committee received, reviewed and challenged reports from management and the external auditors setting out the significant issues in
relation to the 2015 annual report and made their own assessment. These issues were discussed and challenged with management during
the year. They were also discussed with the auditors at the time the committee reviewed and agreed the auditors’ Group audit plan and at
the conclusion of the audit of the financial statements. The issues that were discussed were:
Inventory provisions: the committee considered and agreed that the inventory provisions were appropriate given the robust
formulaic process applied and the level of risk.
Capitalisation of development costs: the committee reviewed the accounting and disclosure of development costs and concluded
that this was appropriate but that management should continue to monitor this closely in the context of product release cycles and
underlying sales trends.
Continental european reorganisation and deferred tax recognition: the committee, having made enquiries of management and
having considered the opinions given by of the Group’s tax advisers, are comfortable that the costs associated with and deferred tax
asset arising on the reorganisation of the business have been appropriately recorded and will be utilised in the foreseeable future.
17 Games Workshop Group PLC
CORPORATE GOVERNANCE REPORT continued
Significant issues considered by the audit committee continued
The committee reviews the independence of the external auditors by assessing the arrangements for the day to day management of the
audit relationship as well as reviewing the auditors’ report which describes their procedures for identifying and reporting conflicts of
interest. To maintain the auditors’ independence, the committee has also established the policy that the primary role of the external
auditors is to perform services directly related to their audit responsibilities. Non-audit fees paid to the auditors are therefore minimal. The
Group uses other advisers for taxation advice and other services. The audit fees are disclosed in note 9.
The committee calls upon the external auditors, the internal auditors and the executive directors to attend formal meetings as required.
These meetings are held at least three times a year. The external and internal auditors are given the opportunity to raise any matters or
concerns they may have in the absence of the executive directors at separate meetings with the audit committee or its chairman.
The audit committee considers the reappointment of the external auditors each year, as well as remuneration and other terms of
engagement. PricewaterhouseCoopers LLP have acted as external auditors of the Group since the 2005 year end. During the year the
external audit was put out to tender and the committee agreed that PricewaterhouseCoopers should remain as auditor. There are no
contractual obligations which restrict the choice of external auditors.
City committee
The City committee comprises the non-executive directors and is chaired by N J Donaldson. It normally meets at least twice a year and is
responsible for corporate governance, investor relations, City presentations and liaison with City advisers. The City committee held two
meetings during the year, each of which was attended by all members of the committee.
Remuneration and nomination committee
The remuneration and nomination committee comprises the non-executive directors and is chaired by N J Donaldson. It normally meets at
least twice a year and is responsible for making recommendations to the board on remuneration policy for all executive directors (including
determining specific remuneration packages, terms of employment and performance incentive arrangements). It is also responsible for
nominating, for approval by the board, candidates for appointment to the board. The procedures and guidelines used by the remuneration
and nomination committee in determining remuneration are outlined in the separate remuneration report. The remuneration and
nomination committee held two meetings in the year, which were attended by all members of the committee. The committee meets
without the executive directors at least annually to appraise the executive directors’ performance.
Appointments to the board
On 1 January 2015, R F Tongue was appointed to the board as a group finance director, effective from that date. Following the Company’s
recruitment procedures, the board determined that R F Tongue would be a suitable and valuable addition to the board.
Any director appointed during the year is required, under the provisions of the Company’s articles of association, to retire and seek
election by the shareholders at the next annual general meeting.
Internal control
The directors recognise that they have overall responsibility for ensuring that the Group maintains a sound system of internal control to
safeguard shareholders’ investment and the Group’s assets, and for reviewing its effectiveness. The system is designed to manage risks
that may prevent the Group from achieving its business objectives, rather than to eliminate these risks. However, even the most effective
system can provide only reasonable, and not absolute, assurance against material misstatement or loss.
The directors have established an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, which
has been in place from the start of the year until the date of approval of this report. This process is regularly reviewed by the board
throughout the period in accordance with the document ‘Internal Control: Revised Guidance for Directors on the Combined Code’ (the
revised Turnbull guidance).
The effectiveness of the Group's system of internal control is continuously reviewed by the board. The review covers all material controls,
including financial, operational and compliance controls and risk management. The monitoring of control procedures is achieved through
regular review by the group finance director, reporting to the board. This review process considers whether significant risks have been
identified, evaluated and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more
extensive monitoring. Regular reporting by senior management ensures that, as far as possible, the controls and safeguards are being
operated appropriately. This process is considered by the audit committee, alongside the external auditors’ reports.
The Group has continued its programme of internal audit reviews during the year. The audit committee agrees an annual internal audit
plan, focusing on business specific issues. Actions agreed by management, in response to recommendations made, are followed up.
The board, with advice from the audit committee, has completed its annual review of the system of internal control in accordance with the
guidance as set out in the revised Turnbull guidance, and is satisfied that it has acted appropriately and in accordance with that guidance.
During the course of its review of the system of internal control, the board has not identified nor been advised of any failings or
weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions is not considered
appropriate.
18 Games Workshop Group PLC
Communication with shareholders
The Company attaches great importance to its annual general meeting, which it considers to be the primary platform of communication
between the Company and its shareholders. On a continuing basis the Company encourages two way communication with its institutional
and private shareholders and responds promptly to queries received verbally, in writing or directly through its investor relations website
investor.games-workshop.com.
The CEO and group finance director are available to meet with shareholders in Nottingham to discuss any issues which shareholders may
have. Any issues arising at such meetings are reported to and considered by the board.
Remuneration report
The Company’s policy on executive remuneration and details of the executive directors’ salaries, profit share and pensions, and fees for the
non-executive directors are set out in the board report on remuneration on pages 20 to 27.
Statement of compliance with the UK Corporate Governance Code
With the exception of provisions A.2.1 and A.3.1, the Company has complied with all of the provisions set out in section 1 of the Code.
By order of the board
R F Tongue
Group finance director and company secretary
27 July 2015
19 Games Workshop Group PLC
REMUNERATION REPORT
Introduction
The remuneration report for the year ended 31 May 2015 has been prepared on behalf of the board by the remuneration committee in
accordance with the requirements of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, as amended, and meets the relevant requirements of the Listing Rules of the Financial Conduct
Authority and the UK Corporate Governance Code.
The remuneration report is split into two parts:
•
•
The directors’ remuneration policy, which sets out the Company’s proposed policy on directors’ remuneration, which took effect
from the 2014 annual general meeting (‘AGM’) and the key factors that were taken into account in setting the policy. Additional
disclosure to permit the use of discretion within the remuneration policy, a change to the profit share scheme and the ability to
pay non-executive directors consultancy fees in certain circumstances have been included in 2015 and so the policy will again be
subject to a binding vote at the 2015 AGM. The policy will then be subject to a binding shareholder vote at least every three
years.
The annual report on remuneration, which sets out payments made to executive directors and non-executive directors and
details the relationship between company performance and remuneration for the 2014/2015 financial year. The 2014/15 report
will be subject to an advisory shareholder vote at the 2015 AGM.
2014/15 – A year in review
As described by T H F Kirby, the chairman, earlier in this annual report, K D Rountree was appointed CEO of Games Workshop with effect
from 1 January 2015. At the same time T H F Kirby gave up his role as acting CEO, continuing as non-executive chairman of the Company.
Also with effect from 1 January 2015 R F Tongue, formerly company secretary, was appointed group finance director and company
secretary of the Company. In connection with these changes the committee undertook a review of the remuneration of the chairman and
the executive directors at that time, taking into account their new responsibilities and general economic and market conditions. As a result
of this review the base annual salary of T H F Kirby was reduced from £450,000 to £200,000; the base annual salary of K D Rountree was
increased from £240,000 to £375,000; and R F Tongue’s base annual salary was set at £180,000. The committee proposes to review these
base salaries payable to the executive directors at or about the end of the 2015/16 financial year.
Following his appointment as CEO and with the approval of the committee, in March 2015 K D Rountree agreed terms with T H F Kirby
whereby the latter would provide consultancy services to the Company focusing on specific aspects of the business; this arrangement will
be reviewed in early 2016.
2015/16 – The year ahead
The committee is very much aware of the importance to the Company and its shareholders of the successful transfer of power and
responsibility to the new executive board team, mindful in particular that Games Workshop is a most individual business. The committee
believes that the appointments and arrangements put in place in early 2015 are appropriate in that connection.
More broadly, the committee seeks to keep under review the consistency of remuneration policy across the Group and is satisfied that an
appropriate reward structure exists below board level to recognise and retain the Group’s top talent.
N J Donaldson
Chairman
Remuneration and nomination committee
27 July 2015
20 Games Workshop Group PLC
Policy report
This part of the report sets out the directors’ remuneration policy, which has applied since the AGM held on 17 September 2014 where it
was approved by shareholders. The policy will apply until the AGM in 2017 (unless revised by a vote of shareholders before that time) save
that at this year’s AGM there will be a resolution proposed to approve the amendments to the remuneration policy, namely, the exercise
of discretion by the committee in the application of the remuneration policy where the changes do not have a material advantage to the
directors and modification of the profit share scheme. Our remuneration policy now also contemplates paying to non-executive directors
consultancy fees in circumstances in which they provide to the Company (at the request of the Company) additional services, based upon
their specific areas of expertise, which the board considers to be of value to the Company and beyond that which can reasonably be
expected to be provided by a non-executive director.
Games Workshop is a most individual business. We have a simple strategy: we make the best fantasy miniatures in the world and sell them
globally at a profit and we intend to do this forever. We embrace long-term thinking, and hence we do not operate bonus schemes of the
usual kind or incentive schemes as we believe they can sow the seeds of short-termism. We seek to pay the right remuneration for the job
– our real ‘bonus’ is the opportunity to work at Games Workshop and grow the business.
In terms of senior management, Games Workshop continues to be in a phase of transition. As described earlier in this report, in January
2015 T H F Kirby, our chairman for 16 years and acting CEO since January 2013, stood down from this latter role and became non-executive
chairman of the Company. At the same time K D Rountree took up the position of CEO and R F Tongue that of group finance director. The
committee believes that each of these individuals is being compensated appropriately for his/her responsibilities.
The aim of the Group’s remuneration policy is to reward fairly and to attract, motivate and retain high quality management. The total size
of the remuneration package for executive directors is judged by comparison with the remuneration packages of similar companies, having
regard to:
• the size of the company, its turnover, profits and number of people employed
• the diversity and complexity of the business
• the geographical spread of the business
• the growth and expansion profile
The Company’s non-executive directors are remunerated with fees in line with market rates. They do not receive any pension or other
benefits, other than the reimbursement of reasonable expenses, and they do not participate in any bonus or share schemes.
Remuneration policy table
The table below summarises each of the components of the remuneration package for directors of the Company which comprise the
policy. The committee may make minor changes to the policy, which do not have a material advantage to the directors, to aid its operation
or implementation, taking account of the interests of shareholders but without needed to seek shareholder approval.
Component
Salary
Purpose and link to
strategy
Core element of fixed
remuneration, reflecting
the size and scope of the
role.
Purpose is to recruit and
retain directors of the
calibre required for the
business.
Performance metrics
Not applicable, although
the individual’s
contribution and overall
performance is one of the
considerations in
determining the level of
any salary increase.
Operation
Reviewed annually and
usually fixed for 12 months
from 1 June. There is no
entitlement to an annual
increase.
Takes into consideration the
director’s role and attitudes.
Takes into account
prevailing market conditions
and is aligned with staff pay
reviews.
Externally benchmarked by
independent remuneration
consultants from time to
time against companies of a
similar size and complexity.
Maximum potential value
There is no prescribed
maximum annual increase
in salary.
Salaries are reviewed
taking into consideration
salary increases across the
Group.
Increases out of line with
the workforce are carefully
considered but may be
awarded taking all relevant
factors into account, for
example, increases in
scope and responsibility or
salary falling significantly
below market positioning.
21 Games Workshop Group PLC
REMUNERATION REPORT continued
Remuneration policy table continued
Component
Benefits
Purpose and link to
strategy
Ensures the overall
package is competitive.
Purpose is to recruit and
retain directors of the
calibre required for the
business.
Operation
T H F Kirby received a fuel
allowance, private medical
insurance and life assurance
cover until 1 January 2015.
The executive directors
both receive life assurance
cover.
Maximum potential value
Set at a level which the
committee considers
appropriate against the
market and provides a
sufficient level of benefit
based on individual
circumstances.
Participation in the
sharesave scheme creates
staff alignment with the
Group and promotes a
sense of ownership.
The sharesave scheme is a
HMRC approved monthly
savings scheme facilitating
the purchase of shares at a
discount.
Sharesave contributions
are as permitted in
accordance with the
relevant tax legislation.
Performance metrics
Not applicable.
Pension
To provide cost effective
retirement benefits.
Profit share to 31
May 2015
Rewards performance
against annual targets
linked to the achievement
of sustainable profit
growth.
Profit share from
1 June 2015
Rewards performance
against annual targets
linked to the achievement
of sales growth.
Where appropriate other
benefits may be offered
including allowances for
relocation and other
expatriate benefits.
Participation in a group
personal pension scheme
(or other such plan as may
be deemed appropriate).
Targets are set annually and
any pay out is determined
by the committee after the
period end, based on
performance against those
targets.
All staff participate equally
in the scheme.
Awards are payable in cash.
Targets are set annually and
any pay out is determined
by the committee after the
period end, based on
performance against those
targets.
All staff participate equally
in the scheme.
Awards are payable in cash.
Up to 10% of salary.
Not applicable.
Maximum potential value
is £1,000 per person per
year.
The financial target is
based on growth in core
business operating profit
from the prior year.
Payments range from nil to
£1,000 dependent on the
level of increase in
operating profit from the
prior year.
Maximum potential value
is £250 per person per
year.
The financial target is
based on growth in sales
revenue.
Payments range from nil to
£250 dependent on the
level of increase in sales
revenue from the prior
year.
22 Games Workshop Group PLC
Remuneration policy table continued
Component
Non-executive
directors’ fees
Purpose and link to
strategy
Sole element of non-
executive director
remuneration set at a level
that reflects market
conditions.
Operation
Fees are reviewed annually
taking into account time
commitment,
responsibilities and fees
paid by comparable
companies.
Maximum potential value
Fees are based on the level
of fees paid to non-
executive directors serving
on boards of listed
companies of a similar size
and complexity.
Performance metrics
Not applicable.
Additional fees are paid to
the senior independent
director to reflect additional
responsibilities.
Non-executive directors are
entitled to claim reasonable
out of pocket expenses in
connection with the
performance of their duties.
Consultancy fees may be
paid to non-executive
directors for advice in
relation to their particular
areas of expertise.
Explanation of the performance metrics chosen
The performance measures selected are aligned with the Company’s strategy and business objectives. For the profit share in 2014/15, this
was based on growth in core business operating profit and in 2015/16, growth in sales revenue.
Illustration of application of the policy
The charts below show the relative split of remuneration between fixed pay (base salary, benefits and pension) and variable pay (profit
share) for each executive director on the basis of minimum remuneration, remuneration receivable for performance in line with the
Company’s expectations and maximum remuneration.
K D Rountree
R F Tongue
Fixed
Variable
403
403
403
500
400
300
200
100
0
Fixed
Variable
194
194
194
500
400
300
200
100
0
Fixed pay
Target
Maximum
Fixed pay
Target
Maximum
Fixed pay
Profit share
Minimum
Fixed elements of salary,
benefits and pension. Salary is at
31 May 2015 and the value of
benefits has been assumed to be
equivalent to that included in
the single figure remuneration
table on page 25.
Nil
In line with expectations
As per minimum.
Maximum
As per minimum.
Up to £100 per annum.
£250 per annum.
23 Games Workshop Group PLC
REMUNERATION REPORT continued
Differences in policy from the wider employee population
The Company aims to provide a remuneration package that is market competitive, complies with any statutory requirements and is applied
fairly and equitably across the wider employee population. Where remuneration is not determined by statutory regulation, the Company
operates the same core principles as it does for the executive directors, namely;
to remunerate people in a manner that allows for stability of the business and the opportunity for sustainable long-term growth
to seek to remunerate fairly and consistently for each role with due regard to the market place and internal consistency
to apply the profit share equally to all employees, including the executive directors
to encourage employees to own shares through the operation of the sharesave scheme
Remuneration policy for new directors
When setting the remuneration package for a new executive director, the committee would seek to apply the same principles and
implement the policy framework as set out above. Base salary will be set at a level appropriate to the role and the experience of the
director being appointed. Benefits, pension and profit share will be in line with the stated policy. Any buy-out award, should one be
required, will be limited to the amount of salary that will be forgone.
Non-executive director fees will be set at a competitive market level, reflecting the skills, knowledge, experience, responsibilities and time
commitment.
Directors’ service contracts and letters of appointment
Executive
K D Rountree
R F Tongue
Non-executive
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
Date of contract
25 February 2009
25 March 2015
Date of appointment
1 January 2015
18 April 1996
18 April 2002
28 November 2013
Unexpired term of contract
Rolling contract
Rolling contract
Date of last re-election at an AGM
18 September 2013
17 September 2014
17 September 2014
17 September 2014
Notice period
12 months
12 months
Notice period
6 months
6 months
6 months
6 months
In accordance with best practice and as set out in the Code, notice periods in new service contracts for executive directors are set at one
year. Non-executive director appointments are made through letters of appointment for a one year term, subject to election and re-
election by the Company’s shareholders in accordance with the Company’s articles and the Code.
Policy on payment for loss of office
If an executive director’s employment is to be terminated, the committee’s policy in respect of the service agreement (in the absence of a
breach of the service agreement by the director) is to agree a termination payment based on the value of base salary and contractual
pension and other benefits that would have accrued to the director during the contractual notice period. Depending on the particular
circumstances, a director may work the notice period, be placed on garden leave for some or all of the notice period or receive a payment
in lieu of notice in accordance with the service agreement. The committee will consider mitigation to reduce the termination payment to a
leaving director when appropriate to do so, having regard to the specific circumstances.
Non-executive directors’ appointments may be terminated without compensation but with six months’ notice.
External appointments
The executive directors may accept one external appointment with the prior approval of the board from which any fees may be retained.
At present, neither of the executive directors holds any outside directorships.
Consideration of employment conditions elsewhere in the Group
The Group aims to provide a remuneration package to all employees that is market competitive, complies with any statutory requirements
and is applied fairly and equitably across the employee population, taking into account local employment market conditions.
All employees receive a base salary, may join a pension scheme, when eligible, or have equivalent state provided pension benefits.
Employees are also eligible to participate in the sharesave scheme when an invitation is made to do so.
The committee takes into account the general basic salary increase being offered to employees elsewhere in the Group when annually
reviewing the salary increase and remuneration of the executive directors. Employees are not consulted in respect of board remuneration.
Consideration of shareholder views
The committee takes into account shareholder feedback received on remuneration matters, including comments in relation to the AGM
plus any additional comments in correspondence direct with the Company. The committee would seek to engage directly with major
shareholders should any material changes be made to the policy.
24 Games Workshop Group PLC
Annual report on remuneration (subject to audit)
The tables below set out in a single figure the total remuneration, including each element, for each person who served as a director of the
Company during the financial years ended 1 June 2014 and 31 May 2015.
Year ended 31 May 2015
K D Rountree
R F Tongue *
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
Total
*appointed 1 January 2015
Year ended 1 June 2014
Salary/fees
£000
283
72
346
60
52
52
865
Taxable benefits
£000
-
-
2
-
-
-
2
Profit share
£000
-
-
-
-
-
-
-
T H F Kirby
K D Rountree
C J Myatt
N J Donaldson
E O’Donnell*
Total
* appointed 28 November 2013
Salary/fees
£000
450
229
60
52
21
812
Taxable benefits
£000
4
-
-
-
-
4
Profit share
£000
-
-
-
-
-
-
Sharesave
£000
9
4
-
-
-
-
13
Sharesave
£000
12
2
-
-
-
14
Pension related
benefits
£000
32
9
26
-
-
-
67
Pension related
benefits
£000
45
28
-
-
-
73
Total
£000
324
85
374
60
52
52
947
Total
£000
511
259
60
52
21
903
The figures in the single figure tables above are derived as follows:
Salary/fees – the amount of salary/fees received in the year, after any salary sacrifice arrangements for pension contributions.
Taxable benefits – the taxable value of benefits received during the year. These include fuel and private medical insurance.
Profit share – the amount of profit share earned in the year.
Sharesave – the value of the sharesave options granted is based on the fair value of the options at grant. On exercise, the value is based on
the gain made between the option price and the market value of the shares on the date of exercise.
Pension related benefits – the cash value of pension contributions received by the executive directors. This includes the Company’s
contribution into the group personal pension scheme (in the case of K D Rountree and R F Tongue) and into T H F Kirby’s self invested
personal pension plan until 31 December 2014.
In addition, Mrs K Kirby (Lathbury) received £66,185 (2014: £117,461) during the year from the Group for her work as interim head of IT.
Mrs Kirby ceased to work for the Group on 30 November 2014. T H F Kirby provided consultancy at a cost of £25,000 in the year.
During 2014/15 and 2013/14 there were no payments made for loss of office. There were also no payments made to past directors in
either the current or prior year.
CEO remuneration
Total remuneration
% of maximum profit share paid
M N Wells
2012
£000
319
48
2013*
£000
774
-
T H F Kirby
2014
£000
511
-
2013
£000
132
54
K D Rountree
2015
£000
168
-
2015**
£000
291
-
*M N Wells resigned on 31 January 2013 and so all of his remuneration for 2012/13, including the payment for compensation for loss of
office, is included in this table.
**T H F Kirby stepped down as CEO on 31 December 2014 and K D Rountree was appointed CEO with effect from 1 January 2015.
Percentage change in CEO’s remuneration
The table below shows how the percentage change in the CEO’s salary in 2014 and 2015 compares with the percentage change in the
average salary of all employees within the Group. The committee has selected the Group’s entire staff population (excluding the CEO) as
these represent the most appropriate comparator.
Salary
25 Games Workshop Group PLC
CEO
-16.7%
Wider workforce
+2.0%
REMUNERATION REPORT continued
Relative importance of spend on pay
The following table sets out the percentage change in dividends, pre-exceptional profit attributable to owners and employee remuneration
for the year ended 31 May 2015, compared to the year ended 1 June 2014.
Total staff costs
Pre-exceptional profit attributable to owners
Dividends declared
2015
£000
46,846
12,215
16,601
2014
£000
48,614
11,487
-
% change
-3.6%
+6.7%
N/A
Statement of voting at the last AGM
At the last AGM, votes on the remuneration report were cast as follows:
To approve the remuneration report
Votes for
20,133,730
% of vote
91.6%
Votes against
914,375
% of vote
4.2%
Votes withheld
923,285
% of vote
4.2%
Implementation statement
A summary of the remuneration arrangements in 2014/15 and how the policy will be applied during 2015/16 is set out below:
Salary and fees
In May 2013 the committee undertook a benchmarking exercise performed by external remuneration advisers. This reviewed the salaries
of the executive and non-executive directors in order to assess how they compared with prevailing market levels of remuneration. This
review resulted in an increase in salaries in 2013/14.
The remuneration policy for the non-executive directors is determined by the board and is reviewed every year. Fees were externally
benchmarked, as discussed above, taking account of the duties and responsibilities placed on the non-executive directors. The non-
executive directors do not participate in the Group’s sharesave scheme or profit share scheme nor do they receive any benefits or pension
contributions.
Profit share for the year ended 31 May 2015
The maximum profit share that is payable is £1,000 per person per year. The performance targets are based upon pre-exceptional
operating profit growth in the core business.
Profit share for the year ended 30 May 2016
The maximum profit share that is payable is £250 per person per year. The performance targets are based upon sales revenue growth from
the prior year.
Sharesave
New sharesave scheme rules are being proposed for approval by shareholders at the 2015 AGM. A further award of options will be made
under the new sharesave scheme during the year which is on the same basis as previous years.
Remuneration committee
The committee is appointed by the board and comprises N J Donaldson (chairman), C J Myatt, E O’Donnell and T H F Kirby. The committee
is responsible for setting the remuneration packages of the executive directors as well as approving their service contracts. The terms of
reference are available on the investor relations website.
Advisers
As referred to above, in May 2013 the committee was assisted in its work by Innecto, a remuneration consultancy which was appointed by
the Company in consultation with the committee. The committee assessed whether Innecto was independent in the provision of its advice
and concluded that it was independent. The amount paid to Innecto during the 2013/14 year for their advice was £5,000.
26 Games Workshop Group PLC
Directors' interests in shares of the Company
The directors' interests (including their families) in the shares of the Company were as follows:
As at
31 May 2015
ordinary shares
of 5p each
As at
1 June 2014
ordinary shares
of 5p each
Beneficial
15,945
4,700
2,108,650
66,500
20,000
1,500
Non-
beneficial
-
3,300
25,444
-
-
-
Beneficial
12,274
-
2,108,650
66,500
20,000
-
Non-
beneficial
-
-
25,385
-
-
-
K D Rountree
R F Tongue *
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
*appointed on 1 January 2015
Share options
Share options granted to the directors under the sharesave scheme were as follows:
K D Rountree
R F Tongue
At 1 June 2014/
at appointment
2,513
-
3,924
Exercised
(2,513)
-
-
Granted
-
3,924
-
Number as at
31 May 2015
-
3,924
3,924
Exercise dates
Commencement Expiry
Apr-15
Nov-14
Apr-18
Nov-17
Apr-18
Nov-17
Exercise
price
358p
458.7p
458.7p
The options above were granted under the Games Workshop Group PLC 2005 Savings-Related Share Option Scheme which grants options
at a 20% discount on the market price at grant. Participants save a fixed amount monthly for three years in order to fund the exercise of
the option. At exercise an individual may choose to exercise their option or have their savings repaid to them. This scheme is open to all
eligible employees and directors who satisfy a service qualification of at least three months. There are no performance targets associated
with these options.
There were no other movements in directors’ share options during the year. No other directors have been granted share options in the
shares of the Company. There is no movement in directors’ interests in shares of the Company between 31 May 2015 and the date of this
report.
Performance graph
The graph below represents the comparative total shareholder return performance of the Company against that of the index of the FTSE
small cap companies during the previous five years. The index of the FTSE small cap companies has been used because the constituents of
this index most appropriately reflect the Company’s size when compared to alternative indices.
350
300
250
200
150
100
50
0
2010
Games Workshop
FTSE Small Cap
2011
2012
2013
2014
2015
On behalf of the board
N J Donaldson
Chairman
Remuneration and nomination committee
27 July 2015
27 Games Workshop Group PLC
DIRECTORS’ RESPONSIBILITIES STATEMENT
The directors are responsible for preparing the annual report, the remuneration report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the
Group and parent Company financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the
European Union. Under company law, the directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently
make judgements and accounting estimates that are reasonable and prudent
state whether applicable IFRS as adopted by the European Union have been followed, subject to any material departures disclosed
and explained in the financial statements
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will
continue in business
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and Group and enable them to
ensure that the financial statements and the remuneration report comply with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the annual report, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s performance, business model and strategy.
Each of the directors, whose names and functions are listed on page 29, confirms that, to the best of his/her knowledge:
the Group and Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU,
give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and
the strategic report includes a fair review of the development and performance of the business and the position of the
Group, together with a description of the principal risks and uncertainties that it faces.
By order of the board
R F Tongue
Group finance director and company secretary
27 July 2015
28 Games Workshop Group PLC
COMPANY DIRECTORS AND ADVISERS
Directors
T H F Kirby, non-executive chairman
K D Rountree, chief executive officer
R F Tongue, group finance director and company secretary
C J Myatt, senior non-executive director
N J Donaldson, non-executive director
E O’Donnell, non-executive director
Registered office
Willow Road, Lenton, Nottingham, NG7 2WS
Registered number
2670969
Financial advisers and stockbrokers
Peel Hunt LLP, Moor House, 120 London Wall, London, EC2Y 5ET
Chartered accountants and independent statutory auditors
PricewaterhouseCoopers LLP, Donington Court, Pegasus Business Park, Castle Donington, DE74 2UZ
Registrars
Equiniti Limited, Aspect House, Spencer Road, Lancing, BN99 6DA
Solicitors
Browne Jacobson, Victoria Square House, Victoria Square, Birmingham, B2 4BU
29 Games Workshop Group PLC
INDEPENDENT AUDITORS’ REPORT
To the members of Games Workshop Group PLC
Report on the financial statements
Our opinion
In our opinion:
Games Workshop Group PLC’s group financial statements and Company financial statements (the ‘financial statements’) give a
true and fair view of the state of the Group’s and of the Company’s affairs as at 31 May 2015 and of the Group’s profit and the
Group’s and the Company’s cash flows for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union;
the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and
as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
What we have audited
Games Workshop Group PLC’s financial statements comprise:
the Group and Company balance sheets as at 31 May 2015;
the consolidated income statement and the consolidated and Company statements of comprehensive income for the year then
ended;
the consolidated and Company cash flow statements for the year then ended;
the Group and Company statements of changes in total equity for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other explanatory
information.
Certain required disclosures have been presented elsewhere in the annual report, rather than in the notes to the financial statements.
These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as
adopted by the European Union and, as regards the Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
Our audit approach
Overview
Materiality
Audit scope
Overall Group materiality: £825,000 which represents 5% of operating profit before exceptional items
Full scope audits, all conducted by the Group engagement team, were performed on six separate reporting units.
The reporting units audited included the five largest trading units in the Group.
The audited units accounted for 85% of consolidated revenues and 96% of consolidated operating profit before
exceptional items.
Areas of focus Capitalisation of product development costs.
Inventory valuation.
Tax implications of the prior year continental european reorganisation.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates that
involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk
of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are
identified as ‘areas of focus’ in the table on the following page. We have also set out how we tailored our audit to address these specific
areas in order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures
should be read in this context. This is not a complete list of all risks identified by our audit.
30 Games Workshop Group PLC
Area of focus
How our audit addressed the area of focus
We assessed whether the costs capitalised relating to product
development met the criteria set within IAS 38 ‘Intangible assets’. We
agreed a selection of capitalised product development costs to source
documentation, including invoices and timesheets, and determined
that they had been allocated to the correct project.
We obtained and inspected the latest forecasts in respect of projects
to assess recoverability of the capitalised costs. In order to assess the
accuracy of the future sales forecasts, we compared actual FY15 sales
to forecasts made in previous years and evaluated the historical
accuracy of the director’s estimates. We also compared performance
against forecasts of sales made following the year-end. Based on this
assessment, we found the directors’ forecasts to be consistent with the
actual historical outturn of sales and the levels of sales made post-year
end.
We applied sensitivity analysis to the forecasts to understand the
shortfall in revenues that would be required to cause a material
impairment in the carrying value of capitalised costs. We considered
the shortfall required to cause a material impairment unlikely given the
historic accuracy of the directors’ forecasting.
We tested that the Group provisioning policy is in accordance with
IFRSs as adopted by the EU and had been consistently applied. We
understood and assessed manual overrides to the provision calculation
to determine whether these adjustments were appropriate. No
inappropriate adjustments were identified.
We obtained an understanding of management’s process for preparing
future inventory sales forecasts, including how these were challenged
and stress-tested by the directors. We tested the integrity of the
underlying calculations by recalculating them and assessed the
assumptions over future sales forecasts by testing the accuracy of
management’s historic sales forecasts compared to actual outturn. We
noted no material differences between historic provision levels and
actual outturn and were therefore satisfied that the directors
forecasting process was reasonable.
We obtained further evidence over the appropriateness of the
provision by tracing a sample of product lines to post-year end sales
and assessing whether, if there were few or no post year end sales or
post year end sales were for an amount less than the cost of the
inventory, these lines were held at the lower of cost and net realisable
value. No material errors were noted.
We read correspondence between the Group and the relevant tax
authorities in order to understand any ongoing investigations and
conclusions reached during the year. We also read the advice provided
by the Group’s tax advisers and subsequent correspondence between
them and the Group.
We used the knowledge obtained from these sources and our
specialised tax knowledge in the relevant jurisdictions to challenge the
assumptions and judgements made by the directors with regard to
their treatment of these uncertain tax positions. We found the
accounting treatment adopted by the directors to be consistent with
the advice received from their advisers and our expectations.
Capitalisation of product development costs
Refer to page 17 (audit committee report), page 41 (Key
assumptions and estimates) and page 47 (notes).
The Group incurred £4.6m of capitalised product development
costs during the year to 31 May 2015, relating to products the
Group develops to sell through its various channels. The net book
value of such capitalised costs as at 31 May 2015 was £3.5m.
We focused on this area due to the inherent level of judgement
around whether costs capitalised meet the recognition criteria of
IAS 38 ‘Intangible assets’ (‘IAS 38’), a determination that involves
management estimation in particular as regards whether they
are specific to projects which are expected to generate future
cash inflows.
Further, there is a risk that capitalised costs will not be supported
by the future cash inflows generated from product sales.
Inventory valuation
Refer to page 17 (audit committee report), page 41 (Key
assumptions and estimates) and page 50 (notes).
The Group held inventory of £7.6m as at 31 May 2015. The
directors determine the provision for inventory by making
assumptions about future sales by product and applying those to
the current inventory holding.
The Group operates in a retail market where new product
releases are regular. There is a risk that inventories held will not
be sold through and there is inherent judgement in the levels of
sales the directors forecast when assessing realisable value. Over
the last three years the Group has on average written off £1.1m
of inventory per annum. In order to assess the level of provision
required against inventory, the directors assess forecast sales
levels by product and in certain situations this calculation is
subject to manual override to reflect the specific circumstances
of certain inventory lines.
We focused on this area because of the subjectivity around
forecasting future sales performance of newly launched
products, and because of the judgement that exists around the
manual adjustments to the calculation.
Tax implications of the prior year continental european
reorganisation
Refer to page 17 (audit committee report), page 41 (Key
assumptions and estimates) and page 46 (notes).
As part of the Group’s european restructuring in the prior year,
non-compete payments of £1.2m were made for third party
trade sales made by reporting units in Europe and a further
£3.5m of costs were incurred in relation to redundancy and
relocation of certain members of european staff.
Following discussions with its tax advisers, the Group adopted
certain tax treatments in relation to the non-compete payments
and the costs (in terms of deductibility), which are reflected in
the financial statements.
There is inherent judgment, as with any uncertain tax position,
that these treatments could still be challenged by the tax
authorities, which could result in further tax, interest and
penalties being payable by the Group.
31 Games Workshop Group PLC
INDEPENDENT AUDITORS’ REPORT continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the
Group operates.
The Group is a vertically integrated business, as shown in note 3 in the notes to the financial statements. The Group financial statements
are a consolidation of a number of reporting units, comprising the Group’s sales, manufacturing and distribution businesses and centralised
functions, and a number of non-trading Group entities.
Accordingly, of the Group’s reporting units, we identified six (being Head Office and five trading entities) that, in our view, required an
audit of their complete financial information, either due to their size or their risk characteristics. Of the trading entities, three are based in
the UK and two in the US. The audit of these trading entities and the Head Office component was performed by the Group engagement
team. These entities accounted for 85% of consolidated revenues and 96% of consolidated operating profit before exceptional items. This,
together with additional procedures performed, including analytical procedures and certain tests of details over specific balances and
transactions, gave us the evidence we needed for our opinion on the Group financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
£825,000 (2014: £850,000).
How we determined it
5% of operating profit before exceptional items. This is consistent with the prior year.
Rationale for benchmark applied We consider this to be the primary benchmark used by key stakeholders to evaluate the performance of
the Group. We exclude exceptional items in order to eliminate volatility arising from one off items which
we believe are not reflective of underlying operations and therefore provides us with a consistent basis
for determining materiality.
We agreed with the audit committee that we would report to them misstatements identified during our audit above £50,000 (2014:
£50,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the directors’ statement, set out on page 15, in relation to going concern. We have
nothing to report having performed our review.
As noted in the directors’ statement, the directors have concluded that it is appropriate to prepare the financial statements using the going
concern basis of accounting. The going concern basis presumes that the Group and Company have adequate resources to remain in
operation, and that the directors intend them to do so, for at least one year from the date the financial statements were signed. As part of
our audit we have concluded that the directors’ use of the going concern basis is appropriate.
However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s and
Company’s ability to continue as a going concern.
Other required reporting
Consistency of other information
Companies Act 2006 opinions
In our opinion:
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the information given in the corporate governance report set out on pages 16 to 19 with respect to internal control and risk
management systems and about share capital structures is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
Information in the annual report is:
materially inconsistent with the information in the audited financial statements; or apparently materially
incorrect based on, or materially inconsistent with, our knowledge of the Group and Company acquired in the
course of performing our audit; or otherwise misleading.
the statement given by the directors on page 28, in accordance with provision C.1.1 of the UK Corporate
Governance Code (‘the Code’), that they consider the annual report taken as a whole to be fair, balanced and
understandable and provides the information necessary for members to assess the Group’s and Company’s
performance, business model and strategy is materially inconsistent with our knowledge of the Group and
Company acquired in the course of performing our audit.
the section of the annual report on page 17, as required by provision C.3.8 of the Code, describing the work of
the audit committee does not appropriately address matters communicated by us to the audit committee.
We have no exceptions to
report arising from this
responsibility.
We have no exceptions to
report arising from this
responsibility.
We have no exceptions to
report arising from this
responsibility.
32 Games Workshop Group PLC
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received
from branches not visited by us; or
the Company financial statements and the part of the remuneration report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Directors’ remuneration report - Companies Act 2006 opinion
In our opinion, the part of the remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors’ remuneration specified
by law are not made. We have no exceptions to report arising from this responsibility.
Corporate governance statement
Under the Companies Act 2006 we are required to report to you if, in our opinion, a corporate governance report has not been prepared by
the Company. We have no exceptions to report arising from this responsibility.
Under the Listing Rules we are required to review the part of the corporate governance report relating to the Company’s compliance with
ten provisions of the UK Corporate Governance Code. We have nothing to report having performed our review.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the directors’ responsibilities statement set out on page 28, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland).
Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently
applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and
the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Andrew Lyon (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
East Midlands
27 July 2015
33 Games Workshop Group PLC
CONSOLIDATED INCOME STATEMENT
Revenue
Cost of sales
Gross profit
Operating expenses
Other operating income - royalties receivable
Exceptional items
Operating profit
Finance income
Finance costs
Profit before taxation
Income tax expense
Profit attributable to owners of the parent
Pre-exceptional
items
Year ended
1 June 2014
£000
123,501
(36,766)
86,735
(71,380)
1,442
-
16,797
106
(7)
16,896
(5,409)
11,487
Exceptional items*
Year ended
1 June 2014
£000
-
-
-
-
-
(4,500)
(4,500)
-
-
(4,500)
1,020
(3,480)
Year ended
31 May 2015
£000
119,132
(36,988)
82,144
(67,207)
1,498
42
16,477
109
(1)
16,585
(4,328)
12,257
Notes
3
4
5
3
7
8
9
10
27
Total
Year ended
1 June 2014
£000
123,501
(36,766)
86,735
(71,380)
1,442
(4,500)
12,297
106
(7)
12,396
(4,389)
8,007
Earnings per share for profit attributable to the owners of the parent during the period (expressed in pence per share):
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share - pre-exceptional items
Diluted earnings per ordinary share - pre-exceptional items
Notes
11
11
11
11
STATEMENTS OF COMPREHENSIVE INCOME
Year ended
31 May 2015
38.3p
38.3p
38.2p
38.1p
Year ended
1 June 2014
25.2p
25.1p
36.1p
36.0p
Profit/(loss) attributable to owners of the parent
Other comprehensive expense
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive expense for the period
Total comprehensive income/(expense) attributable to owners of
the parent
Group
Company
Year ended
31 May 2015
£000
12,257
Year ended
1 June 2014
£000
8,007
Year ended
31 May 2015
£000
16,159
Year ended
1 June 2014
£000
(1,798)
26
(473)
(473)
(1,233)
(1,233)
-
-
-
-
11,784
6,774
16,159
(1,798)
As permitted by section 408 of the Companies Act 2006, the Company’s income statement has not been included in these financial statements.
The notes on pages 38 to 58 are an integral part of these financial statements.
* See note 5 for a description of the exceptional item in the prior period.
34 Games Workshop Group PLC
BALANCE SHEETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in subsidiaries
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Net current assets/(liabilities)
Non-current liabilities
Other non-current liabilities
Provisions
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Retained earnings
Total equity
Notes
Group
Company
31 May 2015
£000
1 June 2014
£000
31 May 2015
£000
1 June 2014
£000
13
14
15
16
19
17
18
19
20
22
24
23
24
25
25
26
27
1,433
8,262
22,719
-
1,195
3,621
37,230
7,625
9,425
600
12,561
30,211
67,441
(13,131)
(1,434)
(529)
(15,094)
15,117
(364)
(458)
(822)
51,525
1,603
10,218
1,182
38,522
51,525
1,433
8,683
21,027
-
1,408
4,715
37,266
8,035
9,145
636
17,550
35,366
72,632
(12,765)
(587)
(3,009)
(16,361)
19,005
(360)
(517)
(877)
55,394
1,593
9,490
1,655
42,656
55,394
-
-
-
30,584
3,900
7
34,491
-
1,180
-
71
1,251
35,742
(738)
-
-
(738)
513
-
-
-
35,004
1,603
10,218
101
23,082
35,004
-
-
-
30,584
3,900
6
34,490
-
313
-
266
579
35,069
(583)
-
(10)
(593)
(14)
-
-
-
34,476
1,593
9,490
101
23,292
34,476
The notes on pages 38 to 58 are an integral part of these financial statements.
The financial statements on pages 34 to 58 were approved by the board of directors on 27 July 2015 and were signed on its behalf by:
K D Rountree, Director
R F Tongue, Director
Registered number 2670969
35 Games Workshop Group PLC
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
At 2 June 2013 and 3 June 2013
Profit for the year to 1 June 2014
Exchange differences on translation of foreign operations
Total comprehensive (expense)/income for the period
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme (note 25)
Deferred tax charge relating to share options
Current tax credit relating to exercised share options
Total transactions with owners
Called up
share capital
£000
1,586
Share
premium
account
£000
9,059
Other reserves
(note 26)
£000
2,888
Retained
earnings
(note 27)
£000
34,321
-
-
-
-
7
-
-
7
-
-
-
-
431
-
-
431
-
(1,233)
(1,233)
-
-
-
-
-
8,007
-
8,007
288
-
(34)
74
328
Total
equity
£000
47,854
8,007
(1,233)
6,774
288
438
(34)
74
766
At 1 June 2014 and 2 June 2014
1,593
9,490
1,655
42,656
55,394
Profit for the year to 31 May 2015
Exchange differences on translation of foreign operations
Total comprehensive (expense)/income for the period
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme (note 25)
Deferred tax charge relating to share options
Current tax credit relating to exercised share options
Dividends paid to Company shareholders
Total transactions with owners
At 31 May 2015
-
-
-
-
10
-
-
-
10
1,603
-
-
-
-
728
-
-
-
728
10,218
-
(473)
(473)
-
-
-
-
-
-
1,182
COMPANY STATEMENT OF CHANGES IN TOTAL EQUITY
At 2 June 2013 and 3 June 2013
Loss for the year to 1 June 2014
Total comprehensive expense for the period
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme
Total transactions with owners
Called up
share capital
£000
1,586
Share
premium
account
£000
9,059
Capital
redemption
reserve
£000
101
-
-
-
7
7
-
-
-
431
431
-
-
-
-
-
12,257
-
12,257
232
-
(71)
49
(16,601)
(16,391)
38,522
Retained
earnings
£000
24,802
(1,798)
(1,798)
288
-
288
12,257
(473)
11,784
232
738
(71)
49
(16,601)
(15,653)
51,525
Total
equity
£000
35,548
(1,798)
(1,798)
288
438
726
At 1 June 2014 and 2 June 2014
1,593
9,490
101
23,292
34,476
Profit for the year to 31 May 2015
Total comprehensive income for the period
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme
Dividends paid to Company shareholders
Total transactions with owners
At 31 May 2015
-
-
-
10
-
10
1,603
-
-
-
728
-
728
10,218
-
-
-
-
-
-
101
16,159
16,159
16,159
16,159
232
-
(16,601)
(16,369)
23,082
232
738
(16,601)
(15,631)
35,004
The notes on pages 38 to 58 are an integral part of these financial statements.
36 Games Workshop Group PLC
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
Cash flows from operating activities
Cash generated from operations
UK corporation tax paid
Overseas tax paid
Net cash from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Purchases of other intangible assets
Expenditure on product development
Interest received
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Interest paid
Dividends paid to Company shareholders
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Opening cash and cash equivalents
Effects of foreign exchange rates on cash and cash equivalents
Closing cash and cash equivalents
Group
Company
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
25,579
(1,912)
(393)
23,274
(6,783)
26
(1,012)
(4,579)
115
(12,233)
738
(1)
(16,601)
(15,864)
(4,823)
17,550
(166)
12,561
24,997
(4,492)
(229)
20,276
(5,673)
54
(1,522)
(4,652)
104
(11,689)
438
-
(5,077)
(4,639)
3,948
13,931
(329)
17,550
15,585
-
-
15,585
-
-
-
-
84
84
738
-
(16,601)
(15,863)
(194)
266
(1)
71
(887)
-
-
(887)
-
-
-
-
79
79
438
-
(5,077)
(4,639)
(5,447)
5,727
(14)
266
Notes
28
28
14
25
12
20
The notes on pages 38 to 58 are an integral part of these financial statements.
37 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS
1. General information
Games Workshop Group PLC (the ‘Company’) and its subsidiaries (together the ‘Group’) designs and manufactures miniature figures and games and
distributes these through its own network of Retail stores, independent retailers and direct via the internet and mail order. The Group has manufacturing
activities in the UK and sells mainly in the UK, Continental Europe, North America, Australia, New Zealand and Asia.
The Company is a public listed company, incorporated and domiciled in the United Kingdom. The address of its registered office is Willow Road, Lenton,
Nottingham, NG7 2WS, United Kingdom.
The Company’s ordinary share capital is listed on the London Stock Exchange.
2. Summary of significant accounting policies
The principal accounting policies applied in these financial statements are set out below. These policies have been consistently applied to all the periods
presented, unless otherwise stated.
Basis of preparation
These financial statements are prepared under the going concern basis and in accordance with International Financial Reporting Standards (IFRSs),
International Financial Reporting Interpretations Committee (IFRIC) interpretations and Standing Interpretations Committee (SIC) interpretations as adopted
by the European Union and with those parts of the Companies Act 2006 applicable to those companies reporting under IFRSs.
The consolidated financial statements are prepared in accordance with the historical cost convention, except for the measurement of certain financial
instruments to their fair value.
Basis of consolidation
The consolidated financial statements include the Company and its subsidiary undertakings drawn up for the years ended 31 May 2015 and 1 June 2014.
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies and are fully consolidated from the date on
which control is transferred to the Group.
Inter-company transactions, balances and unrealised gains and losses on transactions between group companies are eliminated on consolidation.
Accounting policies of subsidiaries are consistent with the policies adopted by the Group. The financial statements of all subsidiaries are prepared to the
same reporting date as the parent Company with the exception of the financial statements of Games Workshop Good Hobby (Shanghai) Commercial Co. Ltd
which are prepared to 31 December. The management accounts of Games Workshop Good Hobby (Shanghai) Commercial Co. Ltd, prepared to 31 May 2015
and 1 June 2014, have been used for consolidation purposes.
Goodwill
Goodwill arising on acquisition of subsidiaries represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment, or when an indicator of impairment
arises, and is carried at cost less accumulated impairment losses. Provision is made for any impairment by comparing the value in use to the net carrying
value. Goodwill is allocated to cash generating units for the purpose of impairment testing.
Goodwill arising on acquisitions prior to 31 May 1998 was written off to reserves in accordance with the accounting standard then in force. As permitted by
the current accounting standard, the goodwill previously written off to reserves has not been reinstated in the balance sheet.
Other intangible assets
Development costs
Costs incurred in respect of product design and development activities are recognised as intangible assets when they meet the criteria of IAS 38 ‘Intangible
Assets’ and are wholly attributable to specific projects. Product development costs recognised as intangible assets are amortised on a straight line basis over
periods ranging between 1 and 48 months to match the expenditure incurred to the expected revenue generated from the subsequent product release.
However, there are some design costs which do not meet the recognition criteria and are therefore not capitalised, and shown in note 9.
Computer software
Acquired computer software licences and related development expenditure are capitalised on the basis of the costs incurred to acquire and bring into use
the specific software. Computer software licences are held at cost and amortised on a straight line basis over the expected useful lives of the assets. Costs
associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to
the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when they meet the criteria
of IAS 38 ‘Intangible Assets’.
Other development expenditure that does not meet these criteria is recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. The principal annual amortisation rates are:
% of cost
15-33
20
33-50
Core business systems computer software
Web store computer software
Other computer software
38 Games Workshop Group PLC
2. Summary of significant accounting policies continued
Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment. The cost of property, plant and
equipment is their purchase cost, together with any incidental costs of acquisition.
Depreciation is calculated on a straight line basis over the expected useful economic lives of the assets concerned to write down to the asset’s residual value
and commences from the date the asset is available for use. The principal annual depreciation rates are:
Freehold buildings
Plant and equipment and vehicles
Fixtures and fittings
Moulding tools
% of cost
2-4
15-33
20-25
25
Leasehold improvements are depreciated over the shorter of the useful economic life of the asset or the period of the lease. These assets are included
within fixtures and fittings. Freehold land is not depreciated.
Trade receivables
Trade receivables are recognised initially at fair value, which is typically the original invoice amount, and carried at amortised cost thereafter. A provision for
impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the
original terms of the receivable. The amount of the provision is recognised in the income statement immediately.
Leases
Operating leases
Leases in which a significant proportion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. The Group’s
commitment in respect of its retail stores is included within this category. Payments in respect of operating leases and any benefits received as an incentive
to sign a lease, are charged or credited to the income statement on a straight line basis over the period of the entire lease term.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined using a standard costing method taking into account variances. In
respect of finished goods, cost includes raw materials, direct labour, other direct costs and related production overheads based on a normal level of
production. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Where necessary
provisions are made for obsolete, slow moving and defective inventories.
Foreign currency translation
The consolidated financial statements are presented in sterling, which is the Company’s functional and presentation currency. Items included in the financial
statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates (the functional
currency). Monetary assets and liabilities expressed in currencies that are not the functional currency are translated into the functional currency at rates of
exchange ruling at the balance sheet date. The financial statements of overseas subsidiary companies prepared in functional currencies other than sterling
are translated into sterling as follows:
- Assets and liabilities are translated at the closing rate at the date of the balance sheet;
- Income and expenses are translated at the average rate for the period;
- All resulting exchange differences are recognised as a separate component of equity.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise deposits with banks and bank and cash balances, net of overdrafts.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Other employee benefits
Pension costs
The Group operates defined contribution schemes and a group personal pension plan. Pension contributions are charged to the income statement as they
accrue. There are no further obligations to the Group once payment has been made.
Bonus and incentive plans
The costs of annual bonus schemes are charged to the income statement as they accrue.
Long service benefits
The Group operates a long service incentive scheme under which employees receive a one off additional holiday entitlement of two weeks when they reach
10 years of employment (10 Year Veterans). The costs of these benefits are accrued over the period of employment based on expected staff retention rates
and the anticipated future employment costs discounted to present value.
Investments
Shares and loans in subsidiary undertakings are stated at cost less provision for impairment.
39 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
2. Summary of significant accounting policies continued
Revenue
Revenue, which excludes value added tax and sales between group companies, represents the invoiced value of goods supplied (net of trade discounts for
sales to independent retailers). Revenue is recognised on dispatch of goods to the customer for sales via the global web store or mail order and for sales to
independent retailers. This represents when the significant risks and rewards of ownership of the goods have transferred to the customer. For revenue
earned through the Group’s retail stores and for digital products, revenue is recognised at the point of sale. Revenue for magazine subscriptions is
recognised on a straight line basis over the subscription period.
Revenue on goods sold to customers on a sale or return basis (which includes book sales) is recognised after making full provision for the level of expected
returns, based on past experience. The level of returns is reviewed on a regular basis and the provision is amended accordingly. Revenue on a sale or return
basis represents no more than 3% of consolidated revenue (2014: no more than 3%).
Royalty income
Royalty income is recognised in the income statement when it can be reliably measured by reference to the underlying licensee performance, after allowing
for expected returns and price protection claims, as notified to the Group by the licensee and following validation of the amounts receivable by the Group.
Cash received as guarantees and advances are deferred on balance sheet whilst it is considered probable that future royalty earnings will at least equal the
amounts received. Such amounts are recognised in the income statement at the point at which they are earned as royalties. In the event that it is no longer
considered probable that future royalty earnings will at least equal the guarantees and advances received, the guarantee and advance payments are taken
to the income statement on a straight line basis over the remaining term of the licence agreement.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive
directors.
Taxation
The charge for current tax is based on the results for the period as adjusted for items which are non-assessable or disallowed. It is calculated using rates that
have been enacted or substantively enacted by the balance sheet date.
Deferred taxation is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. In principle, deferred
tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither
the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the rates that are expected to apply when the asset or liability is settled. Deferred tax is charged or credited in the income
statement, except where it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
Dividends
Dividend distributions are recognised in the financial statements in the period in which they are declared.
Impairment of assets
Assets are tested for impairment in accordance with IAS 36 ‘Impairment Of Assets’. For the purposes of assessing impairment, assets are grouped together
at the lowest levels for which there are separately identifiable cash flows. Discount rates reflecting the asset specific risks and the time value of money are
used for the value in use calculation.
Provisions
Provisions are recognised in accordance with IAS 37 ‘Provisions, Contingent Assets and Contingent Liabilities’.
Provisions are made for committed costs outstanding under onerous or vacant property leases and the estimated liability is discounted to its present value.
Provisions are made for property dilapidations where a legal obligation exists and when the decision has been made to exit a property, or where the end of
the lease commitment is imminent and a reliable estimate of the exit liability can be made. The estimated employee benefit liability arising from the 10 Year
Veterans incentive scheme is classified within provisions. Amounts relating to employees who reach 10 years’ service in more than one year are classified as
non-current. Provisions are made for redundancy costs once the employees affected have a valid expectation that their roles will become redundant.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
40 Games Workshop Group PLC
2. Summary of significant accounting policies continued
Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and disclosure of contingencies at the balance sheet date. If in future such estimates and assumptions, which are
based on management’s best judgement at the date of the consolidated financial statements, deviate from actual circumstances, the original estimates and
assumptions will be modified, as appropriate, in the period in which the circumstances change. The following areas are considered of greater complexity
and/or particularly subject to the exercise of judgement:
- management estimates and judgements are required in assessing the impairment of assets, including capitalised development costs and fixtures and
fittings within loss making retail stores, particularly in relation to the forecasting of future cash flows and the discount rate applied to the cash flows.
- judgement is involved in assessing the exposures in the provisions (including inventory, loss making retail stores, other property, bad debt and returns)
and hence in setting the level of the required provisions.
Exceptional items
Costs which are both material and non-recurring, whose significance is sufficient to warrant separate disclosure in the financial statements, are referred to
as exceptional items. These items are costs that were incurred in the prior period in relation to the continental european reorganisation.
New accounting standards
New accounting standards or interpretations effective in the current period which are relevant to the Group are:
- IFRS 10 'Consolidated financial statements'
- IFRS 12 'Disclosures of interests in other entities'
- Amendments to IAS 32 on financial instruments asset and liability offsetting
These have not had a material impact on the financial statements of the Group or the Company and are unlikely to have a material impact in the future.
New standards, amendments to standards and interpretations which have been published but are not yet effective are not expected to have a significant
impact on the Group or company.
3. Segment information
Segment information reported for the year to 1 June 2014 has been restated since the last annual report to reflect the move to a channel based
management structure.
The chief operating decision-maker has been identified as the executive directors. They review the Group’s internal reporting in order to assess
performance and allocate resources. Management has determined the segments based on these reports.
As Games Workshop is a vertically integrated business, management assesses the performance of sales channels and manufacturing and distribution
channels separately. At 31 May 2015, the Group is organised as follows:
-
-
-
-
-
Sales channels. These channels sell product to external customers, through the Group’s network of retail stores, independent retailers and
directly via the global web store. The sales channels have been aggregated into segments where they sell products of a similar nature, have
similar production processes, similar customers, similar distribution methods, and if they are affected by similar economic factors. The segments
are as follows:
-
Trade. This sales channel sells globally to independent retailers and also includes the Group’s magazine newsstand business and
the distributor sales from the Group’s publishing business (Black Library).
Retail. This includes sales through the Group’s retail stores, the Group’s visitor centre in Nottingham, and global exhibitions.
-
- Mail order. This includes sales through the Group’s global web stores and digital sales through external affiliates.
Product and supply. This includes the design and manufacture of the products and incorporates the production facility in the UK and the Group
logistics and stock management costs.
Central costs. These include the Company overheads, head office site costs, and the costs of running the Games Workshop Academy. This also
includes adjustments for the profit in stock arising from inter-segment sales.
Service centre costs. Provides support services (IT, accounting, payroll, personnel, procurement, legal and customer services) to activities across
the Group and undertakes strategic projects.
Royalties. This is royalty income earned from third party licensees after deducting associated licensing costs.
The chief operating decision-maker assesses the performance of each segment based on operating profit, excluding share option charges recognised under
IFRS 2, ‘Share-based payments’. This has been reconciled to the Group’s total profit before taxation below.
The segment information reported to the executive directors for the year ended 31 May 2015 is as follows:
Trade
Retail
Mail order
Total revenue
41 Games Workshop Group PLC
External revenue
Year ended
31 May 2015
£000
43,940
49,597
25,595
119,132
Restated
Year ended
1 June 2014
£000
46,903
51,974
24,624
123,501
NOTES TO THE FINANCIAL STATEMENTS continued
3. Segment information continued
Segment revenue and segment profit include transactions between business segments; these transactions are eliminated on consolidation. Sales between
segments are carried out at arm’s length. The revenue from external parties reported to the executive directors is measured in a manner consistent with
that in the income statement.
For information, we analyse external revenue further below:
Trade
UK and Continental Europe
North America
Australia and New Zealand
Non-core trade
Total Trade
Retail
UK
Continental Europe
North America
Australia and New Zealand
Non-core retail
Total Retail
Total Mail order
Total external revenue
Operating expenses by segment are regularly reviewed by the executive directors and are provided below:
Trade
Retail
Mail order
Product and supply
Central costs
Service centre costs
Royalties
Total group operating expenses
Total segment operating profit is as follows and is reconciled to profit before taxation below:
Operating profit
Trade
Retail
Mail order
Product and supply
Central costs
Service centre costs
Royalties
Total group operating profit
Finance income
Finance costs
Profit before taxation
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
15,420
17,740
2,000
8,780
43,940
17,496
13,879
9,806
5,619
2,797
49,597
17,475
16,498
1,971
10,959
46,903
16,631
16,349
9,981
5,555
3,458
51,974
25,595
119,132
24,624
123,501
Year ended
31 May 2015
£000
(7,946)
(33,974)
(4,326)
(3,111)
(6,206)
(11,215)
(429)
(67,207)
Year ended
31 May 2015
£000
10,970
(1,050)
14,241
8,643
(6,179)
(11,217)
1,069
16,477
109
(1)
16,585
Restated
Year ended
1 June 2014
£000
(9,627)
(37,288)
(4,125)
(3,841)
(4,968)
(11,157)
(374)
(71,380)
Restated
Year ended
1 June 2014
£000
14,838
(1,636)
14,142
206
(5,240)
(11,081)
1,068
12,297
106
(7)
12,396
An exceptional credit of £42,000 for the year ended 31 May 2015 and exceptional costs of £4,500,000 for the year ended 1 June 2014 have been included
within the product and supply segment.
42 Games Workshop Group PLC
3. Segment information continued
Operating profit as reported above includes impairment, depreciation and amortisation charges as follows:
Trade
Retail
Mail order
Product and supply
Central costs
Service centre costs
Total group charge
Other non-cash charges and significant costs included in operating profit are as follows:
Trade
Retail
Mail order
Product and supply
Central costs
Total group charge
Depreciation and
amortisation
Year ended
31 May 2015
£000
(2)
(1,298)
(927)
(7,909)
(116)
(829)
(11,081)
Restated
Year ended
1 June 2014
£000
(8)
(1,220)
(461)
(7,139)
(378)
(671)
(9,877)
Net charge to inventory
provisions
Redundancy costs and
compensation for loss of office
Year ended
31 May 2015
£000
-
(37)
-
(1,210)
-
(1,247)
Restated
Year ended
1 June 2014
£000
-
(63)
-
(648)
-
(711)
Year ended
31 May 2015
£000
(20)
(712)
(18)
-
(819)
(1,569)
Restated
Year ended
1 June 2014
£000
(424)
(545)
-
(3,037)
(189)
(4,195)
Asset and liability information is not reported to the chief operating decision-maker on a segment basis and therefore has not been disclosed.
External revenue analysed by customer geographical location is as follows:
UK
Continental Europe
North America
Asia Pacific
Rest of the world
External revenue
The Group is not reliant on any one individual customer.
Non-current assets (excluding deferred tax assets) are located in the following countries:
UK
All other countries
Total non-current assets (excluding deferred tax assets)
Year ended
31 May 2015
£000
32,999
33,515
39,864
11,732
1,022
119,132
Year ended
1 June 2014
£000
34,406
39,673
36,776
11,229
1,417
123,501
2015
£000
27,885
5,724
33,609
2014
£000
28,930
3,621
32,551
Tangible and intangible asset additions included within the UK were £8,738,000 (2014: £10,155,000) and all other countries were £3,710,000 (2014:
£1,552,000).
43 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
4. Operating expenses – pre-exceptional items
Selling costs
Administrative expenses
5. Exceptional items
Year ended
31 May 2015
£000
39,596
27,611
67,207
Year ended
1 June 2014
£000
43,193
28,187
71,380
The exceptional credit of £42,000 reported in the current year relates to the release of amounts previously provided for the continental european
restructure. The exceptional items reported in the prior period relate to the continental european reorganisation announced in January 2014. As part of this
reorganisation £2,987,000 was incurred in redundancy and severance costs, £608,000 in closing local country head offices and £905,000 in professional fees
and other costs.
6. Directors and employees
Total directors’ and employees’ costs:
Wages and salaries
Social security costs
Other pension costs
Share-based payment
Group
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
Company
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
40,246
4,497
1,871
232
46,846
41,809
4,867
1,650
288
48,614
1,543
150
106
1
1,800
1,487
190
115
-
1,792
Details of capitalised salary costs, included in the above, are provided in note 14. Redundancy costs and compensation for loss of office, not included in the
above, are provided in note 9.
Key management compensation
The remuneration of the directors and other key management personnel of the Group are set out below in aggregate for each of the categories specified in
IAS 24 ‘Related Party Disclosures’. This subset of people is different to that referred to as ‘senior management’ on page 14.
Short-term employee benefits
Post-employment benefits
Share-based payment
Other long term employee benefits
Year ended
31 May 2015
£000
1,051
93
1
2
1,147
Year ended
1 June 2014
£000
972
98
2
4
1,076
Further information relating to directors’ emoluments, shareholdings and share options is disclosed in the remuneration report on pages 25 to 27.
Key management are the directors of the Company and the head of product and supply.
Employee numbers
Monthly average number of employees (including executive directors) by activity:
Design and development
Production
Selling:
- Full time
- Part time
Administration
The monthly average number of employees for the Company was 11 (2014: 11).
7. Finance income
-
Interest income:
- On cash and cash equivalents
- Other interest income receivable
44 Games Workshop Group PLC
Group
Year ended
31 May 2015
Number
167
146
Year ended
1 June 2014
Number
203
150
824
169
348
844
191
365
1,654
1,753
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
103
6
109
105
1
106
8. Finance costs
Interest expense:
- Unwinding of discount on provisions
- Other interest payable
- Net foreign exchange losses on financing activities
-
-
-
9. Profit before taxation
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
-
1
-
1
3
-
4
7
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,907
(204)
4,991
9
Profit before taxation is stated after charging/(crediting):
Depreciation:
- Owned property, plant and equipment
Impairment/(reversal) of impairment of property, plant and equipment
Amortisation:
- Owned computer software
- Development costs
Non-capitalised development costs
Staff costs (excluding capitalised salary costs shown in note 14 and non-capitalised development costs above)
Impairment of trade receivables
Operating leases:
- Retail stores
- Other property
- Plant and equipment
- Other
Cost of inventories included in cost of sales
Net inventory provision creation (note 18)
Loss on disposal of property, plant and equipment
Loss on disposal of intangible assets
Redundancy costs and compensation for loss of office
Net charge to property provisions including closed or loss making retail stores (note 24)
The comparatives for staff costs (above), non-capitalised development costs and cost of inventories included in cost of sales have been represented in
order to better reflect the underlying nature of the expenditure. This is re-classification only and there is no impact on any previously reported profit
measure.
7,645
448
234
130
18,379
1,247
33
24
1,569
236
1,362
4,728
3,186
40,794
135
849
4,121
3,288
42,127
175
8,474
860
140
149
17,896
711
370
333
4,195
109
Auditors’ remuneration and services provided
Services provided by the Group’s auditors and network firms are analysed as follows:
Audit services
Audit of the Group and Company’s financial statements
Other services
The audit of the Company’s subsidiaries pursuant to legislation
All other services
Total services provided
10. Income tax expense
Current UK taxation:
UK corporation tax on profits for the period
Under/(over) provision in respect of prior periods
UK corporation tax on exceptional items for the period
Current overseas taxation:
Overseas corporation tax on profits for the period
Over provision in respect of prior periods
Total current taxation
Deferred taxation:
Origination and reversal of timing differences
Under provision in respect of prior periods
Origination and reversal of timing differences on exceptional items
Tax expense/(income) recognised in the income statement
Current tax credit relating to sharesave scheme
Deferred tax charge relating to sharesave scheme
Charge/(credit) taken directly to equity
45 Games Workshop Group PLC
Year ended
31 May 2015
£000
Year ended
1 June 2014
£000
53
122
12
187
61
141
10
212
Pre-exceptional
items
Year ended
1 June 2014
£000
Exceptional
items
Year ended
1 June 2014
£000
Year ended
31 May 2015
£000
Total
Year ended
1 June 2014
£000
3,165
253
9
3,427
347
(539)
3,235
893
200
-
4,328
(49)
71
22
2,956
(54)
-
2,902
908
(360)
3,450
1,645
314
-
5,409
(74)
34
(40)
-
-
(1,051)
(1,051)
-
-
(1,051)
-
-
31
(1,020)
-
-
-
2,956
(54)
(1,051)
1,851
908
(360)
2,399
1,645
314
31
4,389
(74)
34
(40)
NOTES TO THE FINANCIAL STATEMENTS continued
10. Income tax expense continued
The tax on the Group’s profit before taxation differs from the standard rate of corporation tax in the UK as follows:
Profit before taxation
Profit before taxation multiplied by the standard rate of corporation tax in the UK of 20.83% (2014: 22.67%)
Effects of:
Items not deductible for tax purposes
Movement in deferred tax not recognised
Higher tax rates on overseas earnings
Adjustments to tax charge in respect of prior periods
Total tax charge for the period
Year ended
31 May 2015
£000
16,585
3,455
Year ended
1 June 2014
£000
12,396
2,810
481
(4)
482
(86)
4,328
662
(10)
1,027
(100)
4,389
Included within the £4,328,000 disclosed above, £11,000 relates to changes in rates of UK corporation tax in the year from 21% to 20% from 1 April 2015.
Further reductions were included in the Summer Budget 2015 announced on 8 July 2015, which has not been substantively enacted, to reduce the rate to
19% from 1 April 2017 and 18% from 1 April 2020. The overall effect of these further changes, if applied to the deferred tax balance at the balance sheet
date, would be to reduce the deferred tax asset by an additional £9,000.
11. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue
during the period.
Profit attributable to owners of the parent (£000)
Weighted average number of ordinary shares in issue (thousands)
Basic earnings per share (pence per share)
Basic earnings per share - pre-exceptional items
Year ended
31 May 2015
12,257
31,975
38.3
Year ended
1 June 2014
8,007
31,805
25.2
Basic earnings per share - pre-exceptional items is calculated by dividing the profit attributable to owners of the parent, before exceptional items, by the
weighted average number of ordinary shares in issue during the period.
Pre-exceptional profit attributable to owners of the parent (£000)
Weighted average number of ordinary shares in issue (thousands)
Basic earnings per share – pre-exceptional items (pence per share)
Diluted earnings per share
Year ended
31 May 2015
12,215
31,975
38.2
Year ended
1 June 2014
11,487
31,805
36.1
The calculation of diluted earnings per share has been based on the profit attributable to owners of the parent and the weighted average number of shares
in issue throughout the period, adjusted for the dilutive effect of share options outstanding at the period end.
Profit attributable to owners of the parent (£000)
Weighted average number of ordinary shares in issue (thousands)
Adjustment for share options (thousands)
Weighted average number of ordinary shares for diluted earnings per share (thousands)
Diluted earnings per share (pence per share)
Diluted earnings per share - pre-exceptional items
Year ended
31 May 2015
12,257
31,975
50
32,025
38.3
Year ended
1 June 2014
8,007
31,805
129
31,934
25.1
The calculation of diluted earnings per share - pre-exceptional items has been based on the profit attributable to owners of the parent, before exceptional
items, and the weighted average number of shares in issue throughout the period, adjusted for the dilutive effect of share options outstanding at the period
end.
Pre-exceptional profit attributable to owners of the parent (£000)
Weighted average number of ordinary shares in issue (thousands)
Adjustment for share options (thousands)
Weighted average number of ordinary shares for diluted earnings per share (thousands)
Diluted earnings per share – pre-exceptional items (pence per share)
46 Games Workshop Group PLC
Year ended
31 May 2015
12,215
31,975
50
32,025
38.1
Year ended
1 June 2014
11,487
31,805
129
31,934
36.0
12. Dividends per share
A dividend of 16 pence per share, amounting to a total dividend of £5,077,000, was paid during the year ended 1 June 2014 and was declared in the prior
period. A dividend of 20 pence per share, amounting to a total dividend of £6,373,000, a dividend of 16 pence per share, amounting to a total dividend of
£5,099,000, and a further dividend of 16 pence per share, amounting to a total dividend of £5,129,000, were declared and paid during the current period.
13. Goodwill
Group
Cost
At 1 June 2014 and 2 June 2014
Exchange differences
At 31 May 2015
Accumulated amortisation
At 1 June 2014 and 2 June 2014
Exchange differences
At 31 May 2015
Net book value at beginning of period and end of period
The Company had no goodwill at either period end.
£000
2,408
(6)
2,402
(975)
6
(969)
1,433
Impairment tests for goodwill
The goodwill arose on the acquisition of TJA Tooling Limited, the acquisition of Triple K Plastic Injection Moulding Limited and the purchase by EURL Games
Workshop of the lease associated to Heroic Diffusion SARL, which under IFRS amounted to the purchase of a business.
In accordance with the requirements of IAS 36 ‘Impairment of Assets’ the Group completed a review of the carrying value of goodwill as at each period end.
The impairment review was performed to ensure that the carrying value of the Group’s assets are stated at no more than their recoverable amount, being
the higher of fair value less costs to sell and value in use. The key assumptions for the recoverable amount of the goodwill are the long-term growth rate and
the discount rate. The long-term growth rate used is purely for the impairment testing of goodwill under IAS 36 ‘Impairment of Assets’ and does not reflect
the long-term planning assumptions used by the Group for any other assessments.
In determining the value in use, the calculations use cash flow projections for a period no greater than five years based on plans approved by management
and, for the Group’s cash-generating unit concerned, assumes a long term growth rate no higher than 2% (2014: 2%). The estimated future cash flows
expected to arise from the continuing use of the assets are calculated using a pre-tax discount rate of 6% (2014: 10%).
Management reviewed the planned sales growth and gross margin on the investment in future product releases and initiatives currently being undertaken,
to deliver the expected future performance.
Goodwill is allocated to the Group’s cash-generating units (CGUs) for impairment testing. All of the current goodwill arises in the product and supply
segment. Sensitivity analysis has not been disclosed in these financial statements since management consider that there is no reasonably possible change in
the key assumptions that would cause the carrying value of goodwill to fall below its recoverable amount.
14. Other intangible assets
Group
Cost
At 2 June 2013 and 3 June 2013
Additions
Exchange differences
Disposals
At 1 June 2014 and 2 June 2014
Additions
Exchange differences
Disposals
At 31 May 2015
Accumulated amortisation
At 2 June 2013 and 3 June 2013
Amortisation charge
Exchange differences
Disposals
At 1 June 2014 and 2 June 2014
Amortisation charge
Exchange differences
Disposals
At 31 May 2015
Net book amount
At 1 June 2014
At 31 May 2015
47 Games Workshop Group PLC
Computer
software
£000
Development
costs
£000
12,951
1,316
(247)
(4,395)
9,625
1,116
24
(265)
10,500
(8,062)
(849)
232
4,062
(4,617)
(1,362)
(26)
241
(5,764)
5,008
4,736
22,014
4,652
-
(1,754)
24,912
4,579
-
(1,753)
27,738
(18,870)
(4,121)
-
1,754
(21,237)
(4,728)
-
1,753
(24,212)
3,675
3,526
Total
£000
34,965
5,968
(247)
(6,149)
34,537
5,695
24
(2,018)
38,238
(26,932)
(4,970)
232
5,816
(25,854)
(6,090)
(26)
1,994
(29,976)
8,683
8,262
NOTES TO THE FINANCIAL STATEMENTS continued
14. Other intangible assets continued
Amortisation of £4,990,000 (2014: £4,394,000) has been charged in cost of sales and £1,100,000 (2014: £576,000) in operating expenses.
The net book amount of internally generated intangible assets is £3,939,000 (2014: £4,203,000) and acquired intangible assets is £4,323,000 (2014:
£4,480,000). All development costs are internally generated and £2,866,000 (2014: £3,004,000) is capitalised salary costs.
Salary costs of £nil (2014: £195,000) were capitalised during the prior period as part of computer software.
Assets in the course of development, and not amortised, amount to £1,048,000 (2014: £189,000) with current and prior year amounts both being included
within computer software. The current year assets are; the development of the Forge World webstore (£755,000), replacement of warehouse software
(£290,000) and upgrade of till software (£3,000). The prior year related to trade CRM modules.
The Company had no other intangible assets at either period end.
15. Property, plant and equipment
Group
Cost
At 2 June 2013 and 3 June 2013
Additions
Exchange differences
Disposals
At 1 June 2014 and 2 June 2014
Additions
Exchange differences
Disposals
At 31 May 2015
Accumulated depreciation
At 2 June 2013 and 3 June 2013
Charge for the period
Exchange differences
Impairment
Disposals
At 1 June 2014 and 2 June 2014
Charge for the period
Exchange differences
Impairment
Disposals
At 31 May 2015
Net book amount
At 1 June 2014
At 31 May 2015
Fixtures
and
fittings
£000
21,496
1,548
(972)
(3,265)
18,807
1,373
(345)
(1,807)
18,028
(18,843)
(1,262)
839
29
3,180
(16,057)
(1,230)
333
(12)
1,771
(15,195)
Moulding
tools
£000
26,255
2,244
(6)
(2,295)
26,198
1,665
1
(1,364)
26,500
(22,004)
(1,845)
1
-
2,291
(21,557)
(1,891)
(1)
-
1,363
(22,086)
Total
£000
81,217
5,739
(1,323)
(9,527)
76,106
6,753
(309)
(4,670)
77,880
(60,613)
(4,907)
1,134
204
9,103
(55,079)
(4,991)
307
(9)
4,611
(55,161)
Freehold
land and
buildings
£000
Plant and
equipment
and vehicles
£000
18,696
1,701
(345)
(3,757)
16,295
1,791
35
(1,499)
16,622
(15,058)
(1,557)
294
-
3,632
(12,689)
(1,578)
(25)
3
1,477
(12,812)
14,770
246
-
(210)
14,806
1,924
-
-
16,730
(4,708)
(243)
-
175
-
(4,776)
(292)
-
-
-
(5,068)
10,030
11,662
3,606
3,810
2,750
2,833
4,641
4,414
21,027
22,719
Depreciation expense of £2,954,000 (2014: £2,917,000) has been charged in cost of sales, £1,308,000 (2014: £1,226,000) in selling costs and £729,000 (2014:
£764,000) in administrative expenses.
Freehold land amounting to £3,836,000 (2014: £3,836,000) has not been depreciated.
Assets in the course of construction, and not depreciated, amount to £1,103,000 (2014: £943,000). £495,000 (2014: £500,000) of these are included in
moulding tools, £417,000 (2014: £327,000) is included in plant and equipment and vehicles, £51,000 (2014: £90,000) is included in freehold land and
buildings, and £140,000 (2014: £26,000) is included in fixtures and fittings above.
An impairment of £12,000 (2014: reversal of £29,000) relates to fixtures and fittings and a reversal of £3,000 (2014: nil) relates to plant and machinery
within loss making retail stores which have been written down to estimated value in use. This has been charged or credited in selling costs in both periods.
£175,000 in 2014 relates to the previous write down of the warehouse floor. This was credited in selling costs in the prior period.
The Company held no property, plant and equipment at either period end.
48 Games Workshop Group PLC
16. Investments in subsidiaries
Company
Shares in group undertakings – cost
Beginning of period and end of period
2015
£000
2014
£000
30,584
30,584
Investments in group undertakings are stated at cost less any provision for impairment.
The directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive length. A list of subsidiary
undertakings is given below.
Interests in group undertakings
The following information relates to those subsidiary undertakings whose results or financial position, in the opinion of the directors, principally affect the
Group:
Name of undertaking
Games Workshop Limited
Games Workshop Retail Inc.
Games Workshop (Queen Street)
Limited
EURL Games Workshop
Games Workshop SL
Country of
incorporation
or registration
England and
Wales
United States
of America
Canada
France
Spain
Games Workshop Oz Pty Limited
Australia
Games Workshop Deutschland GmbH
Germany
Games Workshop Limited
New Zealand
Games Workshop Italia SRL
Games Workshop International Limited
Games Workshop US Limited
Games Workshop US (Holdings) Limited
Games Workshop Good Hobby
(Shanghai) Commercial Co. Ltd
Games Workshop Trustee Limited
Games Workshop Stockholm AB
Games Workshop Interactive Limited
Warhammer Online Limited
Citadel Miniatures Limited
Games Workshop Limited (Hong Kong)
Italy
England and
Wales
England and
Wales
England and
Wales
China
England and
Wales
Sweden
England and
Wales
England and
Wales
England and
Wales
Hong Kong
Proportion of nominal value
of issued shares held by:
Subsidiary
Company
Company
100%
100%
100%
100%
100%
100%
100%
Principal business activity
Manufacturer, distributor and
retailer of games and miniatures
Distributor and retailer of games
and miniatures
Retailer of games and miniatures
Retailer of games and miniatures
Retailer of games and miniatures
Distributor and retailer of games
and miniatures
Retailer of games and miniatures
Description of
shares held
£1 ordinary
$1 common
stock
Can $1
euro 1
euro 1
Aus $1
euro 1
NZ $1
euro 1
£1 ordinary
100%
£1 ordinary
£1 ordinary
Owners capital
£1 ordinary
100%
100%
Retailer of games and miniatures
100%
Retailer of games and miniatures
100%
100%
100%
Holding company for overseas
subsidiary companies
Holding company for US subsidiary
companies
Intermediary holding company for US
subsidiary companies
Distributor and retailer of games and
miniatures
Trustee
SKR 100
100%
Retailer of games and miniatures
£1 ordinary
100%
£1 ordinary
£1 ordinary
100%
HK$10 ordinary
100%
100%
Dormant
Dormant
Dormant
Dormant
All of the above entities are included in the consolidated accounts for the Group and 100% of the voting rights of all entities is held.
All of the above companies operate principally in their country of incorporation or registration.
The directors consider the value of the investments is supported by the underlying assets of the relevant subsidiary.
49 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
17. Deferred tax
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the
deferred taxes relate to the same fiscal authority. The amounts are as follows:
Deferred tax assets:
- deferred tax asset to be recovered after more than 12 months
- deferred tax asset to be recovered within 12 months
The gross movement on the deferred tax account is as follows:
Beginning of period
Exchange differences
Income statement (charge)/credit
Charged directly to retained earnings
End of period
Analysis of the movement in deferred tax assets and liabilities is as follows:
Group
At 2 June 2013 and 3 June 2013
Charged to the income statement
Charged to equity
Exchange differences
At 1 June 2014 and 2 June 2014
(Charged)/credited to the income statement
Charged to equity
Exchange differences
At 31 May 2015
Group
Company
2015
£000
2,379
1,242
3,621
2014
£000
2,227
2,488
4,715
2015
£000
2
5
7
Company
Group
2015
£000
4,715
70
(1,093)
(71)
3,621
2014
£000
7,221
(482)
(1,990)
(34)
4,715
Accelerated
depreciation
£000
2,025
(442)
-
(104)
1,479
(101)
-
(84)
1,294
Development
costs
£000
(723)
(49)
-
-
(772)
67
-
-
(705)
Losses
available
for offset
£000
3,407
(895)
-
(285)
2,227
(549)
-
109
1,787
2015
£000
6
-
1
-
7
Other
£000
2,512
(604)
(34)
(93)
1,781
(510)
(71)
45
1,245
2014
£000
2
4
6
2014
£000
5
-
1
-
6
Total
£000
7,221
(1,990)
(34)
(482)
4,715
(1,093)
(71)
70
3,621
Other deferred tax assets include deferred tax on adjustments for profit in stock arising from intra-group sales of £948,000 (2014: £921,000).
Deferred tax assets are recognised in respect of tax losses and temporary differences to the extent that the realisation of the related tax benefit through
future taxable profits is probable. This is based on a review of the track record of profitability in the country concerned. There was no unrecognised deferred
tax at 31 May 2015 or 1 June 2014 in either the Group or the Company.
The Group did not obtain a current tax benefit from previously unrecognised tax losses in either of the periods presented.
Company
At 2 June 2013 and 3 June 2013
Credited to the income statement
At 1 June 2014 and 2 June 2014
Credited to the income statement
At 31 May 2015
18. Inventories
Group
Raw materials
Work in progress
Finished goods and goods for resale
Accelerated
depreciation
£000
2
-
2
-
2
Other
£000
3
1
4
1
5
2015
£000
98
230
7,297
7,625
Total
£000
5
1
6
1
7
2014
£000
182
213
7,640
8,035
The Group holds no inventories at fair value less costs to sell.
During the period, the Group utilised an inventory provision of £1,189,000 (2014: £1,175,000) and £1,247,000 (2014: £711,000) has been charged to the
income statement.
The Company holds no inventories at either period end.
50 Games Workshop Group PLC
19. Trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Prepayments and accrued income
Other receivables
Receivables from group companies
Loans to group companies
Total trade and other receivables
Non-current receivables:
Prepayments and accrued income
Other receivables
Loans to group companies
Non-current portion
Current portion
Group
Company
2015
£000
4,740
(252)
4,488
4,787
1,345
-
-
10,620
181
1,014
-
1,195
9,425
2014
£000
4,806
(370)
4,436
4,361
1,756
-
-
10,553
177
1,231
-
1,408
9,145
2015
£000
-
-
-
38
-
1,142
3,900
5,080
-
-
3,900
3,900
1,180
2014
£000
-
-
-
44
16
253
3,900
4,213
-
-
3,900
3,900
313
Trade receivables are recorded at amortised cost, reduced by estimated allowances for doubtful debts. The fair value of trade and other receivables does
not differ materially from the book value.
The effective interest rate on non-current loans to related parties is charged at LIBOR plus 1% in both periods.
There is no significant concentration of credit risk with respect to trade receivables as the Group has a large number of customers which are internationally
dispersed.
The maximum exposure to credit risk at the balance sheet date is the carrying value of each class of asset above. The Group does not hold any collateral over
these balances.
All non-current receivables are due within five years of the balance sheet date.
Trade receivables that are more than three months past due are considered to be impaired unless a payment plan has been agreed with the customer and is
being adhered to. Trade receivables that are less than three months past due are not considered impaired unless amounts are specifically identified as
irrecoverable. The ageing analysis of the Group’s past due trade receivables is as follows:
Up to 3 months past due
3 to 12 months past due
Over 12 months past due
2015
2014
Not impaired
£000
172
-
-
172
Impaired
£000
18
83
51
152
Total
£000
190
83
51
324
Not impaired
£000
264
2
35
301
Impaired
£000
72
152
30
254
Total
£000
336
154
65
555
In addition to the above, current debt of £100,000 (2014: £116,000) has been impaired.
Provision for impairment of receivables
Movements on the provision for impairment of trade receivables are as follows:
Group
At 2 June 2013 and 3 June 2013
Charge for the period
Unused amounts reversed
Receivables written off during the period as uncollectible
At 1 June 2014 and 2 June 2014
Charge for the period
Unused amounts reversed
Receivables written off during the period as uncollectible
At 31 May 2015
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Sterling
Euro
US dollar
Other currencies
Total trade and other receivables
51 Games Workshop Group PLC
£000
416
189
(14)
(221)
370
144
(9)
(253)
252
2014
£000
4,658
2,714
1,781
1,400
10,553
2015
£000
4,907
2,167
2,142
1,404
10,620
NOTES TO THE FINANCIAL STATEMENTS continued
20. Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Cash and cash equivalents
Group
Company
2015
£000
11,942
619
12,561
2014
£000
16,432
1,118
17,550
2015
£000
71
-
71
2014
£000
266
-
266
The Group’s cash and cash equivalents are repayable on demand and include a right of set-off between sterling and other currencies held in the UK.
There were no utilised borrowing facilities at 31 May 2015 or 1 June 2014.
21. Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), liquidity risk, capital risk and
credit risk. The Group’s financial risk management objective is to understand the nature and impact of the financial risks and exposures facing the business.
Foreign currency risk
The majority of the Group’s business is transacted in sterling, euros and US dollars. The principal currency of the Group is sterling.
The Group is exposed to foreign exchange risk principally via:
-
transactional exposure arising from the future sales and purchases that are denominated in a currency other than the functional currency of the
transacting company.
translation exposure arising on investments in foreign operations, where the net assets are denominated in a currency other than sterling.
loans to non-UK subsidiaries.
-
-
The Group does not use foreign currency borrowings or forward foreign currency contracts to hedge foreign currency risk. The level of the Group’s exposure
to foreign currency risk is regularly reviewed by the Group’s finance director and the Group’s treasury policies, including hedging policies, are reviewed to
ensure they remain appropriate.
Foreign exchange sensitivity
The impact on the Group’s financial assets and liabilities from foreign currency volatility is shown in the sensitivity analysis below.
The sensitivity analysis has been prepared based on all material financial assets and liabilities held at the balance sheet date and does not reflect all the
changes in revenue or expenses that may result from changing exchange rates. The analysis is prepared for the euro and US dollar given that these represent
the major foreign currencies in which financial assets and liabilities are denominated. The sensitivities shown act as a reasonable benchmark considering the
movements in currencies over the last two financial periods.
The following assumptions were made in calculating the sensitivity analysis:
-
financial assets and liabilities (including financial instruments) are only considered sensitive to movements in foreign currency exchange rates where
they are not in the functional currency of the entity that holds them.
translation of results of overseas subsidiaries is excluded.
-
Using the above assumptions, the following table shows the sensitivity of the Group’s income statement to movements in foreign exchange rates on US
dollar and euro financial assets and liabilities:
Group
10% appreciation of the US dollar (2014: 10%)
10% appreciation of the euro (2014: 10%)
A depreciation of the stated currencies would have an equal and opposite effect.
There is no impact on equity gains or losses.
2015
Income
Gain/(loss)
£000
27
(35)
2014
Income
Gain/(loss)
£000
500
116
Interest rate risk
The Group no longer has a significant exposure to interest rate risk and hence no interest rate sensitivity has been shown.
Credit risk
Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions as well as credit exposures to independent retailers.
The Group controls credit risk from a treasury perspective by only entering into transactions involving financial instruments with authorised counter-parties
with a credit rating of at least ‘A’, and by ensuring that such positions are monitored regularly. Credit risk on cash and short-term deposits is limited because
the counter-parties are banks with high credit ratings assigned by international credit rating agencies.
There is no significant concentration of credit risk with respect to trade receivables, as the Group has a large number of customers that are internationally
dispersed. Policies are also in place to ensure the wholesale sales of products are made to customers with an appropriate credit history and credit limits are
periodically reviewed. Amounts recoverable from customers are reviewed on an ongoing basis and appropriate provision made for bad and doubtful debts
(note 19). Provision requirements are determined with reference to ageing of invoices, credit history and other available information.
Sales made through our own retail stores or via mail order are made in cash or with major credit cards.
52 Games Workshop Group PLC
21. Financial risk factors continued
Capital risk
The capital structure of the Group consists of net funds (see note 29) and owners’ equity (see note 27). The Group manages its capital to safeguard the
ability to operate as a going concern and to optimise returns to shareholders. The Group’s objective is not to use long-term debt to finance the business.
Overdraft facilities will be used to finance the working capital cycle if required.
The Group manages its capital structure and makes adjustments to it in light of changes to economic conditions and its strategic objectives. To maintain or
adjust the capital structure, the Group may adjust the dividend payment to shareholders, buy back shares and cancel them or issue new shares. The Group
uses return on capital employed to assess capital asset performance.
Liquidity risk
Liquidity is managed by maintaining sufficient cash balances to meet working capital needs.
Cash flow requirements are monitored by short and long-term rolling forecasts both within the local operating units and for the overall Group. In addition,
the Group’s liquidity management policy involves projecting cash flows in the major currencies and considers the level of liquid assets necessary to meet
these, monitoring working capital levels and liquidity ratios.
The undiscounted contractual cash flows of the Group’s financial liabilities, including interest charges where applicable, are shown below. All trade payables
are contractually due within 12 months and therefore the fair values do not differ from their carrying values.
Group
Trade and other payables
Provisions for redundancies and property
Exceptional provisions
Company
Trade and other payables
Financial instruments by category
Financial assets as per balance sheet
Trade receivables
Accrued income
Other receivables
Receivables from group companies
Loans to group companies
Cash and cash equivalents
Total
2015
Between
1 and 2
years
£000
-
71
-
71
Between
2 and 5
years
£000
-
61
-
61
Within
1 year
£000
9,406
337
26
9,769
More
than
5 years
£000
-
-
-
-
2014
Between
1 and 2
years
£000
-
173
-
173
Within
1 year
£000
9,521
303
2,470
12,294
Between
2 and 5
years
£000
-
4
-
4
Within
1 year
2015
£000
690
690
More
than
5 years
£000
-
-
-
-
Within
1 year
2014
£000
548
548
Group
Loans and receivables
2014
£000
2015
£000
Company
Loans and receivables
2014
£000
2015
£000
4,488
-
1,345
-
-
12,561
18,394
4,436
139
1,756
-
-
17,550
23,881
-
-
-
1,142
3,900
71
5,113
-
-
16
253
3,900
266
4,435
Within the Group net cash and cash equivalents are overdrafts of £4,276,000 (2014: £2,810,000) which are subject to a master netting arrangement.
Prepayments have been excluded from the above as they are not financial assets.
Financial liabilities as per balance sheet
Trade payables
Other payables
Accruals
Payables to group companies
Total
Group
Financial liabilities at
amortised cost
2014
£000
2015
£000
Company
Financial liabilities at
amortised cost
2014
£000
2015
£000
4,608
2,692
2,736
-
10,036
5,136
2,286
2,099
-
9,521
12
264
91
324
691
13
13
189
333
548
Deferred income balances and other taxes and social security payables have been excluded from the above as they are not financial liabilities.
53 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
22. Trade and other payables
Current
Trade payables
Other taxes and social security
Other payables
Accruals
Deferred income
Payables to group companies
The fair value of trade and other payables does not materially differ from the book value.
23. Other non-current liabilities
Accruals
Group
Company
2015
£000
4,608
289
2,692
2,849
2,693
-
13,131
2014
£000
5,136
1,008
2,286
2,798
1,537
-
12,765
2015
£000
2014
£000
12
47
264
91
-
324
738
13
35
13
189
-
333
583
Group
2015
£000
364
2014
£000
360
Company
2015
£000
-
2014
£000
-
The fair value of other non-current liabilities does not materially differ from the book value.
The carrying amounts of the Group’s trade and other payables and other non-current liabilities are denominated in the following currencies:
2015
£000
8,147
1,617
2,830
901
13,495
2014
£000
8,205
1,963
1,896
1,061
13,125
Group
Company
2015
£000
529
458
987
2014
£000
3,009
517
3,526
2015
£000
-
-
-
Exceptional
items
£000
2,470
Employee
benefits
£000
568
Property
£000
488
-
(42)
44
(2,446)
26
39
(42)
(26)
(47)
492
299
(63)
8
(263)
469
Employee
benefits
£000
10
(10)
-
2014
£000
10
-
10
Total
£000
3,526
338
(147)
26
(2,756)
987
Total
£000
10
(10)
-
Sterling
Euro
US dollar
Other currencies
Total trade and other payables and other non-current liabilities
24. Provisions
Analysis of total provisions:
Current
Non-current
Total provisions
Group
At 1 June 2014
Charged/(credited) to the income statement:
-
Additional provisions
- Unused amounts reversed
Exchange differences
Utilised
At 31 May 2015
Company
At 1 June 2014
Utilised
At 31 May 2015
The fair value of provisions does not differ from the book value.
54 Games Workshop Group PLC
24. Provisions continued
Employee benefits
The Group operates a long service incentive scheme under which employees receive a one off additional holiday entitlement of two weeks when they reach
10 years of employment (10 Year Veterans). The cost of this benefit is accrued over the period of employment based on expected staff retention rates and
the anticipated employment costs and are utilised once an employee reaches 10 years of employment.
Property provisions
Property provisions relate to property dilapidations and to committed costs outstanding under onerous or vacant lease commitments and will diminish
over the lives of the underlying leases. The above provision is expected to be utilised by 2018. The estimated liability is discounted to its present value
using a discount rate of 4.0% (2014: 4.0%).
Exceptional provisions
Exceptional provisions relate to committed costs associated with the continental european reorganisation announced in January 2014.
25. Share capital
Group and Company
At 2 June 2013
Shares issued under employee sharesave scheme
At 1 June 2014
Shares issued under employee sharesave scheme
At 31 May 2015
Number of shares
(thousands)
31,733
127
31,860
204
32,064
Ordinary
shares
£000
1,586
7
1,593
10
1,603
Share
premium
account
£000
9,059
431
9,490
728
10,218
During the period 203,827 ordinary shares were issued (2014: 127,385). The total authorised number of shares is 42,000,000 shares (2014: 42,000,000
shares) with a par value of 5p per share (2014: 5p per share). All issued shares are fully paid.
26. Other reserves
Group
Beginning of period
Exchange differences on
translation of foreign operations
End of period
Capital
redemption
reserve
£000
101
2015
Translation
reserve
£000
2,604
-
101
(473)
2,131
Other
reserve
£000
(1,050)
-
(1,050)
2014
Capital
redemption
reserve
£000
101
Translation
reserve
£000
3,837
-
101
(1,233)
2,604
Other
reserve
£000
(1,050)
-
(1,050)
Total
£000
1,655
(473)
1,182
The other reserve was created on flotation following a payment to the previous holders of the Company’s ordinary shares.
As at 31 May 2015, the Company’s capital redemption reserve was £101,000 (2014: £101,000). The Company had no other reserves in addition to the
capital redemption reserve at either period end.
Total
£000
10,645
438
11,083
738
11,821
Total
£000
2,888
(1,233)
1,655
Group
£000
34,321
8,007
(34)
74
288
42,656
12,257
(71)
49
232
(16,601)
38,522
Company
£000
24,802
(1,798)
-
-
288
23,292
16,159
-
-
232
(16,601)
23,082
27. Retained earnings
At 2 June 2013 and 3 June 2013
Profit/(loss) attributable to owners of the parent
Deferred tax on share options
Current tax on share options
Share-based payments
At 1 June 2014 and 2 June 2014
Profit attributable to owners of the parent
Deferred tax on share options
Current tax on share options
Share-based payments
Dividends to Company shareholders
At 31 May 2015
55 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
28. Reconciliation of profit/(loss) to net cash from operating activities
Operating profit/(loss)
Depreciation of property, plant and equipment
Net impairment/(reversal) on property, plant and equipment
Loss on disposal of property, plant and equipment (see below)
Loss on disposal of intangible assets (see below)
Amortisation of capitalised development costs
Amortisation of other intangibles
Share-based payments
Dividend income from investments in subsidiary undertakings
Changes in working capital:
- Decrease/(increase) in inventories
- (Increase)/decrease in trade and other receivables
- (Decrease)/increase in trade and other payables
- -(Decrease)/increase in provisions
Net cash from operating activities
Group
2015
£000
16,477
4,991
9
33
24
4,728
1,362
232
-
882
(242)
(395)
(2,522)
25,579
2014
£000
12,297
4,907
(204)
370
333
4,121
849
288
-
(468)
1,545
(952)
1,911
24,997
In the cash flow statement, proceeds from the sale of property, plant and equipment comprise:
Net book amount
Loss on sale of property, plant and equipment
Proceeds from sale of property, plant and equipment
The Company sold no property, plant and equipment during either period.
Company
2015
£000
(1,946)
-
-
-
-
-
-
-
17,646
2014
£000
(2,408)
-
-
-
-
-
-
-
14
-
(260)
155
(10)
15,585
2015
£000
59
(33)
26
-
1,056
450
1
(887)
2014
£000
424
(370)
54
The Group disposed of intangible assets with a net book amount of £24,000 during the period (2014: £333,000). There were no proceeds on disposal in
either period and hence a loss on disposal equivalent to the net book value was recorded.
The Company sold no other intangibles during either period.
29. Analysis of net funds
Group
Cash at bank and in hand
Net funds
Company
Cash at bank and in hand
Net funds
30. Commitments
As at
1 June 2014
£000
17,550
17,550
As at
1 June 2014
£000
266
266
Cash
flow
£000
(4,823)
(4,823)
Cash
flow
£000
(194)
(194)
Exchange
movement
£000
(166)
(166)
As at
31 May 2015
£000
12,561
12,561
Exchange
movement
£000
(1)
(1)
As at
31 May 2015
£000
71
71
Capital commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
Group
Property, plant and equipment
The Company had no capital commitments at either period end.
2015
£000
447
2014
£000
478
56 Games Workshop Group PLC
30. Commitments continued
Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are payable as follows:
Group
Within 1 year
Between 2 and 5 years inclusive
In over 5 years
2015
Other
property
£000
524
846
-
1,370
Retail stores
£000
6,614
10,647
414
17,675
Other
£000
143
115
-
258
Retail stores
£000
6,519
9,890
503
16,912
2014
Other
property
£000
548
1,051
-
1,599
The Company had no operating lease commitments at either period end.
Inventory purchase commitments
Group
Finished goods
Components
Raw materials
2015
£000
1,216
639
43
Other
£000
183
198
-
381
2014
£000
9
337
19
The Company had no inventory purchase commitments at either period end.
Pension arrangements
The Group and Company operate defined contribution schemes. Commitments in respect of pensions are included within prepayments and accruals.
31. Contingencies
The Group has contingent liabilities in respect of the potential reversionary interest in sub-let leasehold properties amounting to £93,000 (2014:
£139,000).
The Company provides indemnities to third parties in respect of contracts regarding their use of the Group’s intellectual property, under commercial
terms in the normal course of business.
The Company has also guaranteed the bank overdrafts of certain Group undertakings for which the aggregate amount outstanding under these
arrangements at the balance sheet date was £1,586,000 (2014: £1,586,000).
For the year ended 31 May 2015, the subsidiary companies listed below are exempt from the requirements of the Companies Act 2006 relating to the audit
of individual statutory accounts by virtue of section 479A. As a result, the Company guarantees all outstanding liabilities to which the subsidiary companies
are subject.
Name of undertaking
Games Workshop Limited
Games Workshop International Limited
Games Workshop US Limited
Games Workshop US (Holdings) Limited
32. Related-party transactions
Country of
incorporation
or registration
England and Wales
England and Wales
England and Wales
England and Wales
Company
registration number
1467092
2924330
7462905
4428814
During the period the Company provided management and similar services to Games Workshop Limited, a subsidiary undertaking.
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation for the Group.
The Group had no related-party transactions in the current or prior period.
Transactions between the Company and its subsidiaries are shown below:
Subsidiary
Games Workshop International Limited
Games Workshop Limited
Nature of transaction
Dividends receivable
Recharges
Dividends receivable
2015
£000
517
398
17,129
2014
£000
16
407
-
57 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
32. Related-party transactions continued
Receivables/(payables) outstanding between the Company and its subsidiaries are shown below:
Subsidiary
Games Workshop Group PLC Employee Share Trust
Games Workshop Limited
Games Workshop Retail Inc.
EURL Games Workshop
Games Workshop SL
Games Workshop Oz Pty Limited
Games Workshop Deutschland GmbH
Games Workshop International Limited
Games Workshop (Queen Street) Limited
Games Workshop Italia SRL
Games Workshop Stockholm AB
Games Workshop Limited (New Zealand)
Amounts owed by
subsidiaries
2015
£000
51
978
71
1
23
-
-
-
1
16
1
-
1,142
2014
£000
50
172
13
-
8
-
4
-
-
4
1
1
253
Non-current loans outstanding between the Company and its subsidiaries are shown below:
Subsidiary
Games Workshop Interactive Limited
Less provision for impairment
Games Workshop Limited
Amounts owed to
subsidiaries
2015
£000
-
-
-
-
-
(5)
-
(319)
-
-
-
-
(324)
2014
£000
-
-
-
(2)
-
(10)
-
(319)
(2)
-
-
-
(333)
Amounts owed by
subsidiaries
2015
£000
6,779
(6,779)
3,900
3,900
2014
£000
6,779
(6,779)
3,900
3,900
In addition, Mrs K Kirby (Lathbury) received £66,185 (2014: £117,461) during the year from the Group for her work as interim head of IT. Mrs Kirby ceased to
work for the Group on 30 November 2014. T H F Kirby provided consultancy at a cost of £25,000 in the year.
58 Games Workshop Group PLC
FIVE YEAR SUMMARY
Revenue
Operating profit – pre-exceptional items and royalties receivable
Exceptional items
Royalties receivable
Operating profit
Finance income
Finance costs
Profit before taxation
Income tax expense
Profit attributable to owners of the parent
Basic earnings per ordinary share
Pre-exceptional earnings per ordinary share
2015
£000
119,132
14,937
42
1,498
16,477
109
(1)
16,585
(4,328)
12,257
38.3p
38.2p
2014
£000
123,501
15,355
(4,500)
1,442
12,297
106
(7)
12,396
(4,389)
8,007
25.2p
36.1p
2013
£000
134,597
20,229
-
1,025
21,254
176
(35)
21,395
(5,077)
16,318
51.5p
51.5p
2012
£000
131,009
15,603
-
3,537
19,140
434
(100)
19,474
(4,760)
14,714
46.8p
46.8p
2011
£000
123,052
12,789
-
2,455
15,244
132
(89)
15,287
(4,047)
11,240
36.0p
36.0p
FINANCIAL CALENDAR
Annual general meeting
Announcement of half year results
Financial year end
Announcement of final results
16 September 2015
January 2016
29 May 2016
July 2016
59 Games Workshop Group PLC
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of Games Workshop Group PLC (the ‘Company’) will be held at the
Company's registered office, Willow Road, Lenton, Nottingham, NG7 2WS at 10.00am on 16 September 2015 for the following
purposes:
Ordinary business
As ordinary business to consider and, if thought fit, to pass the following resolutions 1 to 10 as ordinary resolutions:
Resolution 1
To receive the Company's annual accounts for the year ended 31 May 2015 together with the directors' report, the remuneration
report and the auditor’s report on those accounts, the auditable part of the remuneration report and the directors’ report.
Resolution 2
To elect R F Tongue as a director.
Resolution 3
To re-elect T H F Kirby as a director.
Resolution 4
To re-elect C J Myatt as a director.
Resolution 5
To re-elect N J Donaldson as a director.
Resolution 6
To re-appoint PricewaterhouseCoopers LLP as auditors to hold office until the conclusion of the next general meeting at which
accounts are laid by the Company.
Resolution 7
To authorise the directors to fix the auditors remuneration.
Resolution 8
To approve the remuneration report (excluding the directors’ remuneration policy set out on pages 21 to 24) for the year ended 31 May
2015.
Resolution 9
To approve the directors’ remuneration policy set out on pages 21 to 24, such remuneration policy to take effect from the date on which
the resolution is passed.
Special business
To consider and, if thought fit, pass the following resolutions, of which resolutions 10 and 11 will be proposed as ordinary resolutions and
resolutions 12 and 13 will be proposed as special resolutions.
Resolution 10
That:
(a)
the rules the Games Workshop 2015 Sharesave Plan (the ‘Plan’) (including the Games Workshop 2015 International Sharesave
Plan and US Sharesave Plan set out in the Appendix to the Plan) in the form produced to the meeting and initialled by the
Chairman of the meeting for the purposes of identification, the principal terms of which are summarised in the Appendix to this
notice of annual general meeting be and they are hereby approved and the directors of the Company be and they are hereby
authorised to adopt the Plan and to do all acts necessary and things which they may, in their discretion, consider necessary or
expedient to give effect to the Plan; and
(b)
the directors of the Company be and they are hereby authorised to adopt other plans based on the Plan but modified to take
account of local tax, exchange control or securities laws in overseas territories provided that any shares made available under
such further schemes are treated as counting against any limits on individual or overall participation in the Plan.
60 Games Workshop Group PLC
Resolution 11
That the directors of the Company be generally and unconditionally authorised in accordance with section 551 of the Companies Act
2006 (the ‘Act’) to exercise all the powers of the Company to allot Relevant Securities (as defined below) up to an aggregate nominal
amount of £529,052 provided that this authority shall, unless renewed, varied or revoked by the Company, expire on 15 December
2016 or, if earlier, the date of the next annual general meeting of the Company save that the Company may, before such expiry,
make offers or agreements which would or might require Relevant Securities to be allotted and the directors may allot Relevant
Securities in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This
resolution revokes and replaces all unexercised authorities previously granted to the directors to allot Relevant Securities but without
prejudice to any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.
Relevant Securities means: (i) shares in the Company other than shares allotted pursuant to an employee share scheme (as defined
by section 1166 of the Act), a right to subscribe for shares in the Company where the grant of the right itself constituted a Relevant
Security or a right to convert securities into shares in the Company where the grant of the right itself constituted a Relevant Security;
(ii) any right to subscribe for or to convert any security into shares in the Company other than rights to subscribe for or convert any
security into shares allotted pursuant to an employee share scheme (as defined by section 1166 of the Act). References to the
allotment of Relevant Securities in this resolution include the grant of such rights.
Resolution 12
That subject to the passing of resolution 11 above, the directors of the Company be given the general power pursuant to sections 570
to 573 of the Companies Act 2006 (the ‘Act’) to allot or make offers or agreements to allot equity securities for cash, either pursuant
to the authority conferred by resolution 11 above or by way of a sale of treasury shares, as if section 561(1) of the Act did not apply
to any such allotment, provided that this power shall be limited to:
(a)
(b)
the allotment of equity securities in connection with a rights issue so that for this purpose ‘rights issue’ means an offer of
equity securities open for acceptance for a period fixed by the directors to holders of equity securities on the register on a
fixed record date in proportion (as nearly as may be) to their respective holdings of such securities or in accordance with
rights attached thereto but subject to such exclusions or other arrangements as the directors consider necessary or expedient
in relation to treasury shares, fractional entitlements or any legal or practical problems under the laws of, or the
requirements of any recognised regulatory body or any stock exchange in any territory; and
the allotment of equity securities up to an aggregate nominal amount of £80,159.
The power granted by this resolution will expire on 15 December 2016 or, if earlier, the conclusion of the Company's next annual
general meeting (unless renewed, varied or revoked by the Company prior to or on such date) save that the Company may, before
such expiry make offers or agreements which would or might require equity securities to be allotted after such expiry and the
directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred by this
resolution has expired. This resolution revokes and replaces all unexercised powers previously granted to the directors to allot equity
securities as if either section 89(1) of the Companies Act 1985 or section 561(1) of the Act did not apply but without prejudice to any
allotment of equity securities already made or agreed to be made pursuant to such authorities. For the purposes of this resolution
the expression ‘equity securities’ and references to ‘allotment of equity securities’ respectively have the meanings given to them in
section 560 of the Act.
Resolution 13
That the Company be and is hereby granted general and unconditional authority for the purposes of section 701 of the Companies Act
2006 (the ‘Act’) to make market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of 5p each in the capital
of the Company (‘ordinary shares’) on such terms and in such manner as the directors may from time to time determine provided that:
(a)
(b)
(c)
(d)
(e)
the authority hereby conferred shall expire at the conclusion of the next annual general meeting of the Company or on 15
December 2016 whichever is the earlier;
the maximum aggregate number of ordinary shares that may be purchased is 4,777,507;
the minimum price (excluding expenses) which may be paid for an ordinary share is 5p;
the maximum price (excluding expenses) which may be paid for an ordinary share is the higher of: (i) an amount equal to 105
per cent of the average market value of an ordinary share in the Company for the five business days prior to the day on which
the purchase is made; and (ii) the value of an ordinary share calculated on the basis of the higher of the price quoted for: (a)
the last independent trade of; and (b) the highest current independent bid for, any number of the Company’s ordinary shares
on the trading venue where the purchase is carried out;
the Company may make a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of
such authority which will or may be executed wholly or partly after the expiry of such authority, and may make a purchase of
ordinary shares in pursuance of any such contract.
By order of the board
R F Tongue
Company secretary
27 July 2015
Registered office:
Willow Road, Lenton
Nottingham
NG7 2WS
Registered in England and Wales under number 2670969
61 Games Workshop Group PLC
NOTICE OF ANNUAL GENERAL MEETING continued
Notes
1. Only those members registered on the Company's register of members at 6.00 pm on 14 September 2015 or, if this meeting is adjourned, at
2.
6.00pm on the day two days prior to the adjourned meeting, shall be entitled to attend and vote at the meeting.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your rights to
attend, speak and vote at the meeting and you should have received a proxy form with this document. You can only appoint a proxy using the
procedures set out in these notes and the notes to the proxy form.
3. A proxy does not need to be a member of the Company but must attend the meeting to represent you. Details of how to appoint the chairman of
the meeting or another person as your proxy using the proxy form are set out in the notes to the proxy form. If you wish your proxy to speak on
your behalf at the meeting you will need to appoint your own choice of proxy (not the chairman) and give your instructions directly to them.
4. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more
than one proxy to exercise rights attached to any one share. Details of how to appoint more than one proxy are set out in the notes to the proxy
form.
5. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. A vote withheld is not a vote
in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your
proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any
other matter which is put before the meeting.
6. To appoint a proxy using the proxy form, the form must be completed and signed and sent or delivered to the Company's registrars, Equiniti
Limited, at Aspect House, Spencer Road, Lancing, BN99 6DA so as to be received no later than 48 hours before the time fixed for holding the
meeting. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority)
must be included with the proxy form. In the case of a member which is a company, the proxy form must be executed under its common seal or
signed on its behalf by an officer of the Company or an attorney for the Company.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most
senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of
members in respect of the joint holding (the first-named being the most senior).
7.
9.
8. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. The cut-off time for receipt of proxy
appointments (see above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant cut-off
time will be disregarded. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the
receipt of proxies will take precedence.
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to
revoke your proxy appointment to the Company's registrars, Equiniti Limited, at Aspect House, Spencer Road, Lancing, BN99 6DA. In the case of a
member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the Company
or an attorney for the Company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified
copy of such power or authority) must be included with the revocation notice. The revocation notice must be received by the Company's
registrars, Equiniti Limited, at Aspect House, Spencer Road, Lancing, BN99 6DA no later than the time fixed for holding the meeting. If you
attempt to revoke your proxy appointment but the revocation is received after the time specified then, subject to the paragraph directly below,
your proxy appointment will remain valid.
10. Appointment of a proxy does not preclude you from attending the meeting and voting in person.
11. A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a member
provided that no more than one corporate representative exercises powers over the same share.
12. As at 27 July 2015 (being the last practical date prior to the publication of this notice), the Company's issued share capital comprised 32,063,812
ordinary shares of 5 pence each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total
number of voting rights in the Company as at 27 July 2015 is 32,063,812. The website referred to in note 21 will include information on the
number of shares and voting rights.
13. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights (a 'Nominated Person')
you may have a right under an agreement between you and the member of the Company who has nominated you (a 'Relevant Member') to have
information rights to be appointed or to have someone else appointed as a proxy for the meeting. If you either do not have such a right or if you
have such a right but do not wish to exercise it, you may have a right under an agreement between you and the Relevant Member to give
instructions to the Relevant Member as to the exercise of voting rights. Your main point of contact in terms of your investment in the Company
remains the Relevant Member (or, perhaps, your custodian or broker) and you should continue to contact them (and not the Company) regarding
any changes or queries relating to your personal details and your interest in the Company (including any administrative matters). The only
exception to this is where the Company expressly requests a response from you.
14. You may not use any electronic address provided either in this notice of annual general meeting or any related documents (including the
proxy form), to communicate with the Company for any purposes other than those expressly stated.
15. Under section 338 of the Companies Act 2006, a member or members meeting the qualification criteria set out at note 18 below, may, subject to
conditions, require the Company to give to members notice of a resolution which may properly be moved and is intended to be moved at that
meeting. The conditions are that: (a) the resolution must not, if passed, be ineffective (whether by reason of inconsistency with any enactment or
the Company’s constitution or otherwise); (b) the resolution must not be defamatory of any person, frivolous or vexatious; (c) the request may be in
hard copy form or in electronic form (see note 19 below), must identify the resolution of which notice is to be given by either setting out the
resolution in full or, if supporting a resolution sent by another member, clearly identifying the resolution which is being supported, must be
authenticated by the person or persons making it (see note 19 below); and must be received by the Company not later than 6 weeks before the
meeting to which the request relates.
16. Under section 338A of the Companies Act 2006, a member or members meeting the qualification criteria set out at note 18 below, may, subject
to conditions, require the Company to include in the business to be dealt with at the meeting a matter (other than a proposed resolution) which
may properly be included in the business (a matter of business). The conditions are that: (a) the matter of business must not be defamatory of
any person, frivolous or vexatious, (b) the request may be in hard copy form or in electronic form (see note 19 below), must identify the matter of
business by setting it out in full or, if supporting a statement sent by another member, clearly identify the matter of business which is being
supported, must be accompanied by a statement setting out the grounds for the request, must be authenticated by the persons or person making
it (see note 19 below) and must be received by the Company not later than 6 weeks before the meeting to which the request relates.
62 Games Workshop Group PLC
Notes continued
17. Pursuant to Chapter 5 of Part 16 of the Companies Act 2006 (sections 527 to 531), where requested by a member or members meeting the
qualification criteria set out at note 18 below, the Company must publish on its website, a statement setting out any matter that such members
propose to raise at the meeting relating to the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that
are to be laid before the meeting. Where the Company is required to publish such a statement on its website, it may not require the members
making the request to pay any expenses incurred by the Company in complying with the request, it must forward the statement to the
Company’s auditors no later than the time the statement is made available on the Company’s website, and the statement may be dealt with as
part of the business of the meeting. The request may be in hard copy form or in electronic form (see note 19 below), either set out the statement
in full, or if supporting a statement sent by another member, clearly identify the statement which is being supported, must be authenticated by
the person or persons making it (see note 19 below), and be received by the Company at least one week before the meeting.
18. In order to be able to exercise the members’ right to require circulation of a resolution to be proposed at the meeting (see note 15); a matter of
business to be dealt with at the meeting (see note 16) or the Company to publish audit concerns (see note 17), the relevant request must be
made by a member or members having a right to vote at the meeting and holding at least 5% of total voting rights of the Company, or at least 100
members having a right to vote at the meeting and holding, on average, at least £100 of paid up share capital. For information on voting rights,
including the total number of voting rights, see note 12 above and the website referred to in note 21.
19. Where a member or members wishes to request the Company to circulate a resolution to be proposed at the meeting (see note 15), include a
matter of business to be dealt with at the meeting (see note 16) or publish audit concerns (see note 17) such request must be made in
accordance with one of the following ways: (a) a hard copy request which is signed by you, which states your full name and address and is sent to
Rachel Tongue, Games Workshop Group PLC, Willow Road, Lenton, Nottingham NG7 2WS; or (b) a request which states your full name and
address, and is sent to rachel.tongue@gwplc.com. Please state ‘AGM’ in the subject line of the e-mail.
20. Under section 319A of the Companies Act 2006 the Company must answer any question you ask relating to the business being dealt with at the
meeting unless answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of confidential
information, the answer has already been given on a website in the form of an answer to a question or it is undesirable in the interests of the
Company or the good order of the meeting that the question be answered.
21. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006, is available from
http://investor.games-workshop.com.
22. The following documents will be available for inspection for at least 15 minutes prior to the meeting and during the meeting: (a) copies of the
service contracts of executive directors of the Company and (b) copies of the service agreements of the independent directors of the Company.
23. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the
procedures described in the CREST Manual on the Euroclear website (www.euroclear.com). CREST personal members or other CREST sponsored
members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment made by means of CREST to be valid,
the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & Ireland Limited's
(‘EUI’) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless
of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy, must (in order to
be valid) be transmitted so as to be received by the issuer's agent (ID RA19) by the latest time(s) for receipt of proxy appointments specified in
the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message
by the CREST Applications Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001. CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does
not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST
personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to
those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
24. As an alternative to completing a hard copy proxy form, a shareholder can appoint a proxy or proxies electronically by visiting www.sharevote.co.uk.
Shareholders will need their voting ID, task ID and shareholder reference number (this is the series of numbers printed under their name on the proxy
form). Alternatively, if a shareholder has already registered with Equiniti Limited’s online portfolio service, Shareview, they can submit a proxy form at
www.shareview.co.uk. Full instructions are given on both websites. To be valid, your proxy appointment(s) and instructions should reach Equiniti
Limited no later than 48 hours before the time fixed to hold the meeting. Any electronic communication sent by a shareholder to the Company or the
registrar that is found to contain a computer virus will not be accepted.
Appendix
Summary of the principal terms of the Games Workshop 2015 Sharesave Plan
The Company’s existing Savings-Related Share Option Scheme was approved by shareholders in 2005 and expires, in relation to new grants in 2015.
The Games Workshop 2015 Sharesave Plan (the ‘Plan’) is proposed to replace the Savings-Related Share Option Scheme, and the principal terms of
the Plan are set out below. The Plan is an all employee share plan that will be administered by the board or any duly authorised committee of the
board. In this Appendix, references to the board include, where applicable, any duly authorised committee.
1. General
Participating employees will be given the opportunity to save up to £500 per month (or such other amount permitted under the relevant legislation
from time to time) in accordance with a savings contract for three or five years (a ‘Sharesave Contract’). The proceeds of the Sharesave Contract can
be used to exercise an option to acquire shares at an exercise price set at the date of invitation, which shall not be less than 80% (or such other
percentage as may be permitted by the relevant legislation) of the market value of a share at the date of invitation.
The Plan is proposed to satisfy the requirements of Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003 such that options granted under it
will offer beneficial tax treatment to the participant and the member of the group employing the participant.
As noted below, an Appendix to the Plan constitutes the ‘Games Workshop 2015 International Sharesave Plan’ (the ‘International Plan’) under which
options may be granted to employees outside the UK; the International Plan is not proposed to satisfy the requirements of Schedule 3 to the Income
Tax (Earnings and Pensions) Act 2003.
63 Games Workshop Group PLC
NOTICE OF ANNUAL GENERAL MEETING continued
2. Eligibility
All employees (including an executive director) of the Company, or any of its subsidiaries which participates in the Plan, who have been in employment for a
minimum period determined by the board (not exceeding five years), and any other directors or employees nominated by the board may apply for an option
on any occasion on which invitations are issued.
3. Issue of invitations
Invitations to apply for options may only be issued within the six week period following the approval of the Plan by shareholders, the announcement of the
Company’s results for any period, any day on which changes to legislation affecting employee share schemes are proposed or made or on any day on which
the board determines that exceptional circumstances exist. However, if the Company is restricted from issuing invitations during any such period, invitations
may be issued in the period of six weeks following the relevant restriction being lifted.
4. Terms of options
Options may be granted over newly issued shares, treasury shares or shares purchased in the market. Options are not transferable (other than on death). No
payment will be required for the grant of an option. Options will not form part of pensionable earnings.
5. Overall limit
The Plan is subject to the following overall limit. In any 10 year period, the number of shares which may be issued under the Plan and under any other
employee share plan adopted by the Company may not exceed 10 per cent of the issued ordinary share capital of the Company from time to time.
Treasury shares will be treated as newly issued for the purpose of this limit until such time as guidelines published by institutional investor representative
bodies determine otherwise.
6. Exercise of options
Ordinarily, an option may be exercised within six months of maturity of the Sharesave Contract.
7. Cessation of employment
Options may be exercised if a participant leaves employment by reason of death, injury, disability, redundancy, retirement, the sale of the entity that
employs him out of the group.
If a participant ceases employment with the group in any other circumstances, any option he holds shall lapse on the date on which the participant ceases
employment.
8. Corporate events
Options may be exercised early in the event of a change of control or winding-up of the Company. Alternatively, options may be exchanged (with the
agreement of the acquiring company) for equivalent options over shares in the acquiring company. Options will be exchanged (or will lapse) in the event of
an ’internal reorganisation’.
9. Adjustments
In the event of a variation of the Company’s share capital, the number of shares subject to an option and/or the exercise price, may be adjusted, provided
that any adjustment may only be made in accordance with the requirements of the applicable tax legislation.
10. International plan
An Appendix to the Plan constitutes the Games Workshop 2015 International Sharesave Plan under which options may be granted to employees outside the
UK. The terms of the International Plan are similar to the terms of the Plan, but varied to reflect the grant of options to employees outside the UK, including
in relation to the impact of those employees’ savings being denominated in different currencies and using an IRS qualifying s423 Employee Stock Purchase
Plan for employees in the US.
11. Amendment and termination
The board may amend the Plan at any time, provided that prior approval of the Company’s shareholders in a general meeting will be required for
amendments to the advantage of eligible employees or participants relating to eligibility, limits, the basis for determining a participant’s entitlement to, and
the terms of, the shares or cash comprised in option and the impact of any variation of capital.
However, any minor amendment to benefit the administration of the Plan, to take account of legislative changes, or to obtain or maintain favourable tax
treatment, exchange control or regulatory treatment may be made by the Board without shareholder approval.
No amendment may be made to the material disadvantage of participants in the Plan unless consent is sought from the affected participants and given by a
majority of them.
The Plan will usually terminate on the tenth anniversary of its approval by shareholders but the rights of existing participants will not be affected by any
termination.
12. Documents available for inspection
The rules of the Plan will be available for inspection at the office of Deloitte LLP (Company Secretarial Department), 2 New Street Square, London EC4A 3BZ
on any weekday (Saturdays, Sundays and public holidays excluded) until the close of the AGM, and will also be available at the place of the AGM for at least
15 minutes before and during the meeting.
64 Games Workshop Group PLC