GAMES WORKSHOP GROUP PLC
Annual report 2016
FINANCIAL HIGHLIGHTS
Revenue
Revenue at constant currency*
Operating profit - pre-royalties receivable
Royalties receivable
Operating profit
Profit before taxation
Cash generated from operations
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
2016
£000
118,069
118,192
10,921
5,939
16,860
16,948
26,782
2015
£000
119,132
119,132
14,979
1,498
16,477
16,585
25,579
42.1p
40p
38.3p
52p
2
4
12
17
21
29
30
31
35
35
36
37
38
39
59
59
60
*Constant currency revenue is calculated by comparing results in the underlying currencies for 2016 and 2015, both converted at the 2015 average
exchange rates as set out on page 10.
1 Games Workshop Group PLC
CHAIRMAN’S PREAMBLE
Comply or explain – an effective board
The board spent a day recently debating the fact that many proxy votes were cast against it. They were mostly aimed at the remuneration
policy (a very fashionable topic these days), the non-executive directors who have served ‘too long’ and, me, the chairman on numerous
counts.
As the voting at the AGM itself was unanimously in favour of all resolutions, we would be safe ignoring these proxies, cast as they are,
largely, by institutional investors and often by their compliance teams and not the fund managers themselves. Nevertheless they raise two
issues: have we explained ourselves properly, and does anyone take any notice if we do? We explain ourselves thoroughly in our corporate
governance report (page 17) but some are missed by looking too closely at the detail.
The first issue I will address here by going through the FINANCIAL REPORTING COUNCIL GUIDANCE ON BOARD EFFECTIVENESS (Hogg, 2011)
line by line and explaining where we do and do not comply. I have used this summary document rather than the full Code as it was
published ‘to assist companies in applying the principles of the UK Corporate Governance Code’. The principles are the most important
thing and we none of us want to get hung up on word interpretation. It may take some time but please read on.
The second issue will become apparent as time goes by.
We are charged with being effective and it is a right and proper responsibility. I will quote the Guidance in italics and say what we do
afterwards:
The board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which
enables risk to be assessed and managed1.
I prefer ‘effective’ to ‘entrepreneurial’; nevertheless the board at Games Workshop sees this as its main responsibility. We comply.
An effective board develops and promotes its collective vision of the company’s purpose, its culture, its values and the behaviours it wishes
to promote in conducting its business.
In particular it: provides direction for management; demonstrates ethical leadership, displaying – and promoting throughout the company –
behaviours consistent with the culture and values it has defined for the organisation2; creates a performance culture that drives value
creation without exposing the company to excessive risk of value destruction; makes well‐informed and high‐quality decisions based on a
clear line of sight into the business; creates the right framework for helping directors meet their statutory duties under the Companies Act
2006, and/or other relevant statutory and regulatory regimes; is accountable, particularly to those that provide the companyʹs capital; and
thinks carefully about its governance arrangements and embraces evaluation of their effectiveness.
We do all these and take every point very seriously. We comply. The line where some will disagree with us is this one: creates a
performance culture that drives value creation without exposing the company to excessive risk of value destruction3. We do not have LTIPs
or any bonus schemes for senior management. We do have payment schemes designed to encourage store managers to sell more, and we
have a company wide scheme that allows all employees to share in profitable growth. It rewards ALL employees not just the chosen few.
Both schemes are designed to enhance value. LTIPs and bonuses for senior staff are deemed to be necessary by some to encourage value
creation, but more, to ensure longevity of staff and help with succession planning. These are not needed at Games Workshop4. Our
executive directors both have around 20 years service with the company. Their likely replacements have been here a similar length of time
(well over 10 years). And, yes, they will be internal appointments. In fact, we see 10 years as the running-in period. I suspect these schemes
are needed in businesses that have an eternal merry-go-round of executives who appear and disappear with monotonous regularity. They
are not needed at Games Workshop, and I trust they never will be. Furthermore I believe they are fundamentally self-serving and
disastrously value destroying. Nothing leaves a sourer taste in the mouth than executives lining their own pockets and claiming it is for the
long term good of the business before moving on to their next golden handshake clutching their golden parachute.
At Games Workshop we employ people with integrity. People with integrity always work as hard as they can and always for the good of the
business.
1 This sounds like a contradiction in terms, and, of course, it is. Entrepreneurial is an odd word to use. Most boards aren’t and shouldn’t be. Those that are need to be left to get on
with it.
2 We do this, and I bet we are one of the few who do it properly.
3 Cute use of the word ‘excessive’.
4 This isn’t just theory as we tried it and it was counter productive.
2 Games Workshop Group PLC
Comply or explain – an effective board continued
An effective board should not necessarily be a comfortable place. Challenge, as well as teamwork, is an essential feature. Diversity in board
composition is an important driver of a board’s effectiveness, creating a breadth of perspective among directors, and breaking down a
tendency towards ‘group think’.
We believe we do comply with the intent of this paragraph, whilst acknowledging some may think we do not.
We fully agree that ‘group think’ is a bad thing. We fully agree that challenge is an essential ingredient in an effective board, as is
teamwork. We do not agree that diversity for its own sake is the answer5. We believe that each director must be independent of mind. To
imply that someone is not independent minded because of time served or sex or ethnicity or religion or whatever else is false.
Worse, it implies that 'diversity' adds value, allowing groups and sub-groups to be added to an eternally growing list until the whole thing is
reduced ad absurdum.
I recently received a letter congratulating the board on recruiting a woman as NED, to address our diversity issues. How sexist is that? It is
not our board that is suffering from ‘group think’.
Only independence of mind counts. There are no proxies, no quotas that get around it. Rubbish directors are rubbish directors. The fact
that they allow boxes to be ticked on arcane lists doesn’t make them effective. Good, independent minded directors are as hens’ teeth,
gold dust. We have six. Including me.
One thing Hogg makes very clear is: Ultimately it is for individual boards to decide on the governance arrangements most appropriate to
their circumstances, and interpret the Code and guidance accordingly. Institutions should take this more seriously. Their one-size-fits-all
compliance regime is becoming antithetical to the whole process, and risks bringing their industry into disrepute.
Games Workshop – the IP play
Over the years we have been exhorted by some to develop our revenue stream by ‘leveraging’ our IP. Using our great imagery we could do
all sorts of lucrative and exciting value-enhancing (i.e. take private and re-float) deals. Actually, what they really mean is: do a movie!
We have never NOT done licensing deals, as you can see from the steady stream of royalties we earn; it’s just that we believe we must do
them on our terms and not prostitute the business to any and every deal that comes along. If we do a movie (along with the concomitant
abandonment of the toy rights6) it will be on terms that do not compromise our business. It isn’t likely.
Long term owners will notice a big increase in royalty income this year. Have we sold out at last? No, it’s just that working closely with the
myriad app developers, and being more precise with the terms we offer, we have increased the number of ‘computer’7 games in the
market.
Tom Kirby
Non-executive chairman
25 July 2016
5 ‘Diversity’ is becoming a group think word itself. The cure for all our ills! Nirvana!
6 Anyone doubting this aspect of movies needs to read how Marvel prevented an Iron Man movie having a female as the main baddie because it would hurt the toy sales.
7 This covers phone, tablet, PC and console. We have products on all these platforms.
3 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. This statement includes all the key elements of what we do and why we do it that way. All of our decision making
is focussed on the long term success of Games Workshop, not short term gains.
Let me go through it part by part:
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 focussed 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.
The second element is that we make fantasy miniatures based in our imaginary worlds. This gives us control over the imagery and styles we
use and 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. These independent accounts do a great job supporting our customers in
parts of the world where we either have not yet opened one of our stores or where it is not commercially viable for us to have one of our
stores. The long term goal is to have both channels (retail and trade) growing in harmony. 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 focussed on cash. By delivering a good cash return every year 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 dedication and focus should ensure we deliver on time and within our agreed cash limits.
We measure our long term success by seeking a high return on investment. 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 growth, particularly in North America and Northern Europe.
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: Age of Sigmar 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 181 people, the design studio in Nottingham creates all the IP and the miniatures, artwork, games and publications that we sell.
In 2015/16 we invested £7.5 million in the studio (including software costs) with a further £2.2 million spent on tooling for new plastic
miniatures. We are committed to a similar level of investment every year.
Manufacture
We are proud to manufacture our product in Nottingham. It's where we started and where we intend to stay. We are currently working on
a significant project, with a leading UK software supplier, 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. Our project to
upgrade the IT infrastructure and software for the warehouse that supports our mail order store based in Nottingham will be delivered in
the Autumn of 2016/17.
4 Games Workshop Group PLC
Business model and structure continued
Sell
We sell via three channels, our own stores ‘Retail’, third party independent retailers ‘Trade’ and our ‘Mail order’ web store.
Retail - provides 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 product, just new release product and the appropriate extended
range. At the year end we had 451 Games Workshop stores in 20 countries. Our stores contributed 41% of the year's sales. We have 355
one man stores, small sites, each one staffed by only one store manager. We also have 96 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 around the world and
importantly in areas where we don't have our own stores. Independent retailers are an integral part of our business model; Games
Workshop strives to support those outlets which help to build the Hobby community in their local area. 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. In 2015/16 we had
3,800 independent retailers (2015: 3,700) in 55 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 18 languages covering all time zones. 38% 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 2015/16. All of our stores also have a web store 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 who make all of the big decisions report directly to me. My
team is split into three parts: sales, operations and merchandising and marketing.
My channel sales structure comprises retail, trade and mail order. This structure is made up of four key territory retail sales managers in
the UK, North America, Continental Europe and Australia and New Zealand. We also have a global trade manager and a global mail order
manager along with a sales manager for Asia. During the year I appointed a new global merchandising and marketing manager.
My operations and support structure includes a finance director for Games Workshop who is responsible for accounts, compliance and
legal duties. We have a product and supply manager who is responsible for our factory, logistics and design studios (Citadel and Forge
World). 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.
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.
Our 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: see pages 9 and 10.
MAT Group gross margin
Measures the gross profit achieved on sales after taking account of the direct costs and depreciation of manufacturing equipment and
shipping our product to customers/stores on a rolling 12 month basis: see page 6.
MAT core business profit
Measures gross profit less operating expenses on a 12 month rolling basis, before royalty income: see page 8.
Number of own stores by territory
Measures the number of our own stores which is an indicator of our global reach: see page 10.
MAT number of ordering stockist accounts by territory
Measures the number of trade outlets that have ordered from us in the last six months. It is an indicator of our global reach and the health
of our trade account base: see ‘Trade’ paragraph above.
Return on capital
The ratio of operating profit before royalty income against capital employed, as a percentage: see page 8.
5 Games Workshop Group PLC
STRATEGIC REPORT continued
Key performance indicators continued
Our key non-financial performance 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 shareholder value
Share price
Dividend
e
r
a
h
s
r
e
p
e
c
n
e
p
900
800
700
600
500
400
300
200
100
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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.
Review of the year
We made progress in what was another busy and rewarding year. We started the financial year off with a huge product launch;
Warhammer: Age of Sigmar, one of the biggest changes we've ever made to one of our core universes. Our design to manufacture was
outstanding, over-delivering in terms of original concept art to final manufactured models, producing some of the best models we've ever
made. The simplified rules, supporting the models for those who like to play, made it much easier to get started. We learnt some valuable
lessons during the year on how to deliver product system changes on this scale and as we released more of the range in the second half of
the year, we finished the year with sales of Warhammer: Age of Sigmar at a higher rate than Warhammer has enjoyed for several years.
After a disappointing December we carried out a thorough review of our operational plans and, thanks to a great team effort, we bounced
back with four out of five months of profitable sales growth. Our reported sales for the year showed marginal declines in retail (-1.3%) and
mail order (-1.8%) and growth in trade (+0.1%).
Gross margin was maintained in the period (2016: 68.3%; 2015: 68.9%). We continued with our policy of only increasing the prices of our
new releases (approximately 30% of our sales) to reflect the necessary investment in our product offer and the quality 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 increased in the year, mainly as a result of our store opening programme and the full year effect of the depreciation of the
investment in our visitor centre which opened in April 2015.
6 Games Workshop Group PLC
Update on priorities for 2015/16
In the year we focussed on the following initiatives designed to improve our performance in our existing stores and support future store
openings:
Staff recruitment
In November 2015 I hired a global recruitment consultant. She has been kicking the tyres and carrying out a root and branch review of our
teams and our processes. In January we piloted some of the recommendations in North America and recruited a new small team. It's early
days but we are pleased with the results. We still require all candidates to write us a great letter telling us why they want the job; we have
now complemented this with a direct and online approach to find good staff. The changes are being rolled out across the other retail
territories as well as in our global trade teams in 2016/17.
One man stores
The timing of the changes to recruitment in North America coincided with a small experienced project team being seconded from the UK to
North America to support the existing team there in delivering two objectives.
They delivered both objectives. We now have a small retail sales HQ in Dallas and have successfully opened 16 stores (net) this year, taking
our total to 100 stores. More importantly, we have improved our processes to allow us to open a further 20 each year. Combined with the
improved recruitment team in Dallas we are now more confident that we can deliver the potential of Games Workshop in North America.
We focussed on the following initiatives to deliver an improvement in our product offer, our customer service and how we promote our
product range:
Range
During the year, I carried out a review of our product strategy. As a direct result, we now offer our models at a broader range of price
points. We have piloted a small 'Start Collecting' range of models that have sold well. We have also introduced some stand alone high value
box games, a simple gateway into Games Workshop product; they too have been a hit. We will continue to seek to improve our product
offer and be more customer focussed in 2016/17.
Merchandising and marketing
We are increasingly focussed on promoting our product range better on a global scale. To assist me I recruited a senior global
merchandising and marketing manager in March 2016. He is responsible for supporting our product and supply and sales teams to ensure
our stores make the best use of the space that they have and that we back our three channels with the appropriate product and marketing
support.
We piloted the following initiatives in the year; I will update you further in 2016/17:
Asia
After overcoming the burden of paper work and complexity of opening businesses in Asia we now have four new sales territory managers
in Asia; in Singapore, Hong Kong, Japan and Malaysia in addition to our existing business in China. They will grow Games Workshop
profitably by opening stockist accounts and our own stores.
High footfall locations
We have 96 multi-man format stores and 355 one man stores. Due to the timing of the lease breaks the opportunity arose to pilot some
larger multi-man format stores uniquely placed to service a greater numbers of customers.
Our Tottenham Court Road store, London, is on target to be our highest transaction and sales value store. It has delivered its promises. The
other pilots in Sydney and Copenhagen delivered their promises too. These successes leave us with some format options to deploy when
the opportunities arise. Our standard format will continue to be our one man store model.
New business opportunities
To broaden our reach without distracting our core channels, we are piloting a small range of products in new markets. We launched a
dispenser of eight products called Battle for Vedros in toy shops in North America in June 2016 and will launch a small range called Build
and Paint globally in modelling and toy shops later in 2016/17.
Finally, to assist me in managing our broader commercial opportunities, I have created a new business development team to manage our
broader non-core activities. This team will be responsible for sales and profit growth of our non-core activities which include: licensing,
digital, export, non-strategic trade accounts, book trade, magazine, and appropriate mass market opportunities. The results are shown
under non-core in the segmental analysis.
7 Games Workshop Group PLC
STRATEGIC REPORT continued
Update on priorities for 2015/16 continued
Licensing
The team have had an exciting year, probably our best year to date, with some successful launches: Bloodbowl 2, Warhammer: End Times -
Vermintide, Warhammer 40,000: Freeblade and the launch on 27 May 2016 of the real time strategy game, Total War: Warhammer.
Reported income is split as follows: 78% PC and console games, 15% mobile and 7% other.
Projects
In the year we had three major projects being implemented:
• European ERP - enterprise resource planning (core back office systems) - replacement. This project is more complex and costly than we
had originally stated and will now launch in 2018 at an estimated cost of £6.0 million (2015 estimate: £4.5 million).
• Forge World mail order store. This was delivered on time in August 2015 and within cash limits.
• Mail order warehouse system replacement. It is estimated to cost £0.9 million and will be implemented in 2016/17.
Return on capital*
%
70
60
50
40
30
20
10
0
24
11
5
59
46
46
37
42
40
27
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
A key measure of our performance is return on capital. During the year our return on capital fell from 40% to 27%. This was driven by both
a decline in operating profit before royalty income and an increase in capital employed.
Sales
Reported sales fell by 0.9% to £118.1 million for the year. On a constant currency basis, sales were down by 0.8% from £119.1 million to
£118.2 million; split by channel this comprised: retail £48.9 million (2015: £49.1 million), trade £44.1 million (2015: £44.4 million) and mail
order £25.2 million (2015: £25.6 million).
Operating profit
Core business operating profit (operating profit before royalty income) fell by £4.1 million to £10.9 million (2015: £15.0 million). On a
constant currency basis, core business operating profit decreased by £3.1 million to £11.9 million. This was driven by a decline in our
underlying performance in core retail and mail order.
Costs have been managed well. They have increased by £2.5 million in the year mainly as a result of investments for the long term; £1.9
million in our store opening programme, £0.4 million in a new sales team in Asia and the additional depreciation of our visitor centre which
opened in April 2015.
Capital employed
Average capital employed* increased by £1.7 million to £40.2 million. The book value of tangible and intangible assets increased by £2.3
million whilst inventories increased by £0.5 million and current liabilities increased by £1.0 million.
Cash generation
During the year, the Group’s core operating activities generated £19.5 million of cash after tax payments (2015: £20.7 million). The Group
also received cash of £4.7 million in respect of royalties in the year (2015: £2.6 million). After purchases of tangible and intangible assets
and product development costs of £12.7 million (2015: £12.4 million) and dividends of £12.8 million (2015: £16.6 million) there were net
funds at the year end of £11.8 million (2015: £12.6 million).
*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.
8 Games Workshop Group PLC
Cash generation continued
The chart below shows a bridge of operating profit to cash generated.
Bridge of operating profit to cash generated
+£10.5m
-£12.7m
-
-£2.6m
-£0.8m
+£0.6m
£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
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
2016
£million
1.8
2.6
3.5
0.1
8.0
2015
£million
0.8
3.0
1.6
2.4
7.8
In 2015/16 we invested £1.8 million in shop fits: 48 new stores and 20 refurbishments. We also invested £2.6 million in tooling, milling and
injection moulding machines. The investment in computer software relates to the new Forge World web store as well as the initial work on
the new ERP system and mail order warehouse system replacement. 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 40 pence per share (2015: 52p) were paid during
the year (£12.8 million; 2015: £16.6 million).
Royalty income
Royalty income increased in the period by £4.4 million to £5.9 million. This was due to the strong performances of Total War: Warhammer
and Warhammer: End Times - Vermintide.
Taxation
The tax rate for the year was 20.4% (2015: 26.1%). 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
41% (2015: 41%) of sales were made through our own stores, 38% (2015: 38%) of sales were to independent retailers and 21% (2015: 21%)
were mail order.
Mail order 21%
Own stores 41%
Trade 38%
9 Games Workshop Group PLC
STRATEGIC REPORT continued
Retail
Store openings and closures during the year
UK
North America
Europe
Australia
Asia
Number of stores
at May 2015
142
84
145
43
4
418
Opened
9
19
13
3
4
48
Closed
(3)
(3)
(9)
-
-
(15)
Number of stores
at May 2016
148
100
149
46
8
451
Number of one man
stores at May 2016
111
86
113
38
7
355
Number of one man
stores at May 2015
108
72
105
36
3
324
We opened 48 new stores in the year including 7 relocated stores. These new stores generated £2.1 million of sales and made a loss of £0.1
million. Due to the under performance of some of our new stores in Continental Europe, we have paused any new store openings in this
territory for 2016/17. Our main focus for store openings will be North America. This will allow us to focus on improving our existing store
performance.
Retail sales fell by 1.3 % in the year (-0.4% at constant currency). Our underlying performance was -4.4%, which was mostly offset by the
contribution from 33 net new stores and our new visitor centre delivering 100% growth.
Our underlying performance in our own stores to January 2016 wasn’t good enough. I made some changes in our in-country retail support
structure to address the decline. Our flat management structure did not support the complexity of managing 149 stores across 14 countries
in Continental Europe. In January 2016 we moved to a country based solution. We now have four territory managers;
Germany/Scandinavia, Netherlands, France and Spain/Italy. We are also piloting five training stores in North America. These training stores
are run as profitable stores. To reduce travel time and cost we now send our new recruits for their initial training to one of these stores.
We are launching a new skills based training programme at our August 2016 global retail workshops.
Trade
Sales increased by 0.1% during the year (-0.7% at constant currency). Our new trade team for accounts in the UK and Continental Europe
has settled in well and made some progress in the year. Sales in North America were broadly in line with last year. We have also updated
our trade product range in June 2016 to ensure we provide our stockist accounts with our best sellers.
Mail order
Sales fell by 1.8% (-1.6% at constant currency). Sales of our Forge World range grew by 28% offset by a 12% decline in our Citadel range. In
the first half of 2016/17 we will be making a change to our home page; removing complexity and adding a deeper introduction to our
worlds. We are committed to continuous investment in our web store shopping experience.
During the year we successfully migrated our web data centre to a new location in North America.
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.
Interest rate risk
Net interest receivable for the year (excluding unwinding of discounts on provisions) was £90,000 (2015: £108,000).
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
2016
1.32
1.35
2015
1.39
1.31
2016
1.46
1.49
2015
1.53
1.58
The net impact in the year of these exchange rate fluctuations on our operating profit was a reduction of £0.6 million (2015: reduction of
£2.5 million).
Gender diversity, greenhouse gases, social, community and human rights, and employees
We report on these topics in the directors’ report on pages 14 and 15.
10 Games Workshop Group PLC
Priorities for 2016/17
As part of our overall strategy, three key initiatives will be prioritised in 2016/17. These are designed to deliver sales growth whilst
maintaining our operating profit margin.
Firstly, staff recruitment.
Globally we recruit hundreds of people every year. Building on the progress we made last year we are updating our recruitment web site,
our company branding across all other social media platforms and creating a site to enable us to welcome and commence induction prior
to new recruits starting with us. These improvements will also give us a global dashboard of recruitment metrics to help us develop and
train our global recruitment teams and processes.
Secondly, we will continue to review our product range and offer.
We will be reviewing our entry level ‘getting started’ product range and in store merchandising. Currently all of our own stores carry the
same retail range. We will be looking at a matrix approach of broadening our product range in our higher volume stores and optimising our
product range in some of our smaller stores. We will also continue to invest in core IP with exciting product launches planned throughout
2016/17.
Thirdly, we will continue to focus on recruiting new customers and retaining our existing customers for longer. The aim is to:
1. Open more of our own stores, mostly in our one man store format. My goal is to open 20 stores (net) in 2016/17, subject to the
continued improvement of our existing stores.
2. Open more stockist trade accounts using our 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.
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 principal risks identified in 2015/16 are
discussed below. These risks are not intended to be an extensive analysis of all risks that may arise but more importantly are the ones that
could cause business interruption in the year ahead. The financial risks impacting the Group are detailed on pages 53 and 54.
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. It is being implemented and managed by a strong internal project team and specialist ERP
software consultants.
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. We discuss our approach as to
how we are managing this risk on page 7.
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. In line
with our ERP project, we have a strong internal project team and are utilising specialist supply chain software consultants.
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. Our approach to managing this risk is discussed on page 7.
Distractions - this is anything else that gets in the way of us delivering our goals.
We do not consider that we have material solvency or liquidity risks. We also feel that it is too early to tell what the effects of the recent EU
referendum vote will be on Games Workshop.
In my opinion the greatest risk is the same one that we repeat each year, namely, management. So long as we have the right people in the
right jobs 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 are working together as one great Games Workshop team and I believe the progress we have made in the second half demonstrates
we have built some solid foundations for the year ahead.
We have again honoured our commitment to distribute genuinely surplus cash to our shareholders. That commitment isn't going to
change.
We are confident we can achieve the priorities I have set for 2016/17. I will keep you appropriately informed.
The board continues to believe that the prospects for the business are good.
Kevin Rountree
CEO
25 July 2016
11 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 29
May 2016.
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 22 July 2016 have been disclosed to the Company:
Ruffer LLP
Investec Asset Management Limited
Massachusetts Financial Services Company
Phoenix Asset Management Partners Limited
Schroders plc
Aberforth Partners LLP
Artemis Investment Management LLP
FIL Limited
No. of shares
3,187,405
3,087,765
2,044,385
1,865,218
1,677,861
1,636,300
1,620,001
1,516,682
%
9.9
9.6
6.4
5.8
5.2
5.1
5.0
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 40 pence per share (2015: 52 pence) were paid during the year (£12.8 million; 2015: £16.6 million).
Directors
The present directors of the Company are listed on page 30. All of the directors were members of the board throughout the year and up to
the date of signing the financial statements.
Under the Company’s articles of association one third of the directors are required to retire by rotation at each annual general meeting
(‘AGM’). Those who retire are the longest in office since their election or last re-election. Under this formula, at this year’s AGM, two
directors require re-election. 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, N J Donaldson and E O’Donnell 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. The non-executive directors have formally evaluated the performance of T H F Kirby as non-executive
chairman and consider him to be effective in his role; 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 25 July 2016.
Information on executive directors
K D Rountree (age 46), CEO. Kevin 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.
12 Games Workshop Group PLC
Information on executive directors continued
R F Tongue (age 45), 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 since 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 66), 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 Company. 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 72). 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 62). Nick Donaldson was appointed to the board on 18 April 2002. A barrister by profession, Nick is a partner of London
Bridge Capital Partners LLP. 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 45). 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 25 July 2016, 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 22 July 2016, 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 22 July 2016 there were 32,120,708 (2015: 32,063,812) 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 carry 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 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.
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.
13 Games Workshop Group PLC
DIRECTORS’ REPORT continued
Share capital, share rights and other information continued
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. As at 29 May 2016, the Company had an unexpired authority to repurchase shares up to a
maximum of 4,777,507 shares. During the year no shares were purchased in the market for cancellation.
Changes to the articles of association must be approved by the shareholders in accordance with the legislation in force from time to time.
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 in a takeover.
Constructive use of the AGM
The chairmen of the audit, the City and the remuneration and nomination committees will be available to answer questions at the AGM.
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 17 to 20.
Health, safety and environment
Games Workshop is fully committed to the safety of our customers and the safety, health and wellbeing of our employees. Our people are
our most valuable asset. We care about our colleagues and want to look after them.
Over the past 12 months the health, safety and environment team has benefited from the addition of further expertise and experience. We
continue to develop, improve and enhance the health and safety standards of our manufacturing, engineering and warehousing operations
in Nottingham, and we continue to develop the global standards which will form the basis of a co-ordinated health, safety and
environmental strategy across the Group. These global standards will be fully implemented across the business in the next 12 months.
Injury reporting
During the year there were 10 injuries reported under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013
(‘RIDDOR’) in the UK (2015: 4) and 5 recordable cases reported to the US Occupational Safety and Health Administration (2015: 3). The
increase in the number of RIDDOR reports is reflective of an increasing awareness of health and safety matters.
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 for the year to 29 May 2016. 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 are not owned or controlled by Games Workshop but which 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
2015/16
580
4,766
5,346
0.077
0.045
2014/15
685
4,579
5,264
0.083
0.044
In response to an ESOS energy audit of the Lenton site, the ENERGY16 initiative was launched in February 2016 with the aim of reducing
our energy usage on the Lenton site by over 5% by the end of January 2017. This is being achieved by tracking energy usage, a staff
engagement campaign to reduce energy consumption and the fitting of low energy equipment across the site.
14 Games Workshop Group PLC
Waste management
We sent 67% of our waste by weight from our Nottingham site for re-use or recycling (2015: 64%). 33% of our waste was sent for heat
recovery at the Nottingham City Council incinerator (2015: 36%).
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 1% in April 2016 to
£379 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. Since its launch on site in October 2015, over 60 members of staff have enjoyed the
benefits of subsidised travel via the Nottingham tram2work scheme.
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.
With effect from April 2016, the Group adopted the UK Living Wage for all UK employees regardless of age.
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 board believes that business can benefit
from a wide 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 29 May 2016, the workforce is comprised as follows:
The board
Senior management
Total workforce
Male
4
6
1,441
Female
2
1
304
Total
6
7
1,745
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. There are no donations to political parties.
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 4 to 11.
15 Games Workshop Group PLC
DIRECTORS’ REPORT continued
Going concern and viability statement
Assessment of prospects
The Group operates a strategic planning process which includes quarterly reviews of business and financial performance, monthly financial
projections and an annual planning review for the next financial year. Medium term projections (for periods ending two years and three
years hence) are extrapolated from the plan for the following financial year taking into account known strategy changes. This strategic
planning process is managed centrally, led by the finance director.
Assessment of viability
The strategic plan reflects the directors’ cautious view of possible outcomes. It is not used to set targets for performance.
The viability assessment has been conducted for a period of three years which is in line with the Group’s strategic planning period.
In making the viability assessment the principal risks facing the business have been considered and a number of severe but plausible
scenarios assessed for the impact of these on the medium term projections. The scenarios tested include:
A significant interruption in the supply chain impacting the manufacturing operations
A global shortage in availability of plastic raw materials
A failure in the existing ERP system before the new ERP system goes live
Viability statement
Based on the board’s assessment as described above, the directors confirm that they have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as they fall due over the three year period ending May 2019.
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 at least twelve months from the date of approval of the financial statements. 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
25 July 2016
16 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 2014 (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 21 to 28, 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. The board operates primarily through its
monthly meetings and is responsible for leading and controlling the Group and monitoring executive management. It considers all issues
relating to strategy, direction and future direction of the Company. The board has a schedule of matters reserved to it for decision that is
regularly updated; these include decisions on the Group’s strategy, financial plans, major capital expenditure and dividend policy. The
board is updated about operational decisions through the monthly meetings. It meets at least nine times a year. In 2015/16 the board had
10 scheduled meetings, each of which was attended by all members of the board. Terms of reference for the board committees (as set out
below) are available on the Company’s website.
The Company maintains an appropriate level of director and officer liability insurance cover and has agreed to indemnify the directors
against certain liabilities as discussed in the directors’ report on page 12.
A review of the performance of the Group’s main business activities is included in the strategic review. The board presents this review,
together with the directors’ report on pages 12 to 16, 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. 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 does not meet the independence criteria set
out in the Code as he was formerly the Company’s acting CEO.
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 four non-executive directors have a breadth of successful commercial and professional experience and are considered by the board to
be independent of the Group (excluding the chairman). 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 non-executive 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 focusses 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.
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.
17 Games Workshop Group PLC
CORPORATE GOVERNANCE REPORT continued
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 2016/17. 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 of the Company 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 four 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’ 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 2016 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 2016 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
• 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 2016 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
18 Games Workshop Group PLC
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 and
amounted to £9,000 in the year; this relates to the verification of retail turnover certificates for certain stores. 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 re-appointment 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. Andrew Lyon is the audit
partner and he was appointed during 2014/15 and will rotate after five years. In 2014/15 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.
Whistleblowing
The audit committee is responsible for the review of the Company’s procedures for responding to the allegations of whistleblowers and the
arrangements by which staff may, in confidence, raise concerns about possible financial reporting irregularities.
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 three 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
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 AGM.
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.
19 Games Workshop Group PLC
CORPORATE GOVERNANCE REPORT continued
Communication with shareholders
The Company attaches great importance to its AGM, 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 21 to 28.
Conflicts of interests
The Company’s articles of association take account of certain provisions of the Companies Act 2006 relating to directors’ conflicts of
interests. 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 interests of the Company. The board has adopted procedures for the approval of such conflicts.
The board’s powers to authorise conflicts are operating effectively and the procedures are being followed.
Statement of compliance with the UK Corporate Governance Code
With the exception of provision of 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
25 July 2016
20 Games Workshop Group PLC
REMUNERATION REPORT
Introduction
The remuneration report for the year ended 29 May 2016 has been prepared on behalf of the board by the remuneration and nomination
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.
This 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 2015 annual general meeting (‘AGM’) and the key factors which were taken into account in setting the policy. The committee has
taken note of some shareholders’ concern over the Company’s ability to pay non-executive directors consultancy fees in certain
circumstances – a permission which was granted by shareholders at the 2015 AGM - and is therefore proposing that this permission
should be withdrawn. The directors’ remuneration policy, revised by the removal of this permission but otherwise unchanged, will
therefore be subject to a binding vote at the 2016 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 2015/16 financial year. The 2015/16 report will be subject to an
advisory vote at the 2016 AGM.
2015/16 – a year in review
As described in last year’s annual report, K D Rountree and R F Tongue, the Company’s CEO and group finance director and company
secretary respectively, were appointed with effect from 1 January 2015. They have therefore recently completed their first full year in
these roles: they have had a busy time, running the business day-to-day alongside changing how it operates in accordance with the
strategy agreed by the board.
As anticipated in last year’s remuneration report, the committee reviewed the base salaries payable to the executive directors at the end
of the 2015/16 financial year. To assist in this review the committee again appointed Innecto Reward Consulting (‘Innecto’), a
remuneration consultancy which the Company last appointed in May 2013, to conduct an external pay benchmarking exercise. Following
the presentation by Innecto of its report and discussion within the committee of the Company, the committee has resolved to increase the
salary of R F Tongue to £220,000 from July 2016. No other changes to board remuneration have been made. The committee proposes to
review the base salaries payable to the executive directors at or about the end of the 2016/17 financial year. In conducting such reviews,
the committee seeks to take into account, among other factors, corporate performance on environmental, social and governance issues.
As described above in this report, in the light of some shareholders’ concern over the Company’s payment of consultancy fees to T H F
Kirby, the Company’s non-executive chairman, this arrangement was terminated in January 2016. With effect from 1 January 2016 T H F
Kirby receives a fixed annual fee of £250,000 (previously £200,000), taking account of the additional services he provides to the Company
beyond those which would normally be expected of a non-executive chairman. Between March 2015 and December 2015 T H F Kirby
received consultancy fees totalling £60,000. No other consultancy fees have been paid by the Company to any of the other non-executive
directors of the Company.
2016/17 – the year ahead
The committee remains 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. We believe that the team is making solid progress, enjoying the support of the Games
Workshop workforce.
As noted above in the chairman’s preamble, the board takes seriously its responsibilities in applying the principles of UK corporate
governance. Properly incentivising executive directors, and senior management generally, forms part of this area of focus. The board has
from time to time discussed the desirability of introducing share incentive and/or bonus schemes for senior managers; it is presently
satisfied that the existing - group wide - scheme which allows all employees to share in profitable growth works well within the Group. It is
therefore a key responsibility of the committee that the salaries of senior management are set at the correct levels, properly reflecting the
value of the contribution and effort made to the Company. The committee believes that the length of service with the Company
demonstrated by the executive directors - and many senior managers - is some evidence of the fact that compensation levels have been
set appropriately.
Looking to the future, the committee will continue to monitor the consistency of remuneration policy across the Group with a view to
ensuring that an appropriate reward structure exists to recognise and retain the Group’s top talent. As part of this process the committee
will continue to keep under review and discuss regularly the effectiveness of the Company’s approach to remuneration and its component
parts.
N J Donaldson
Chairman
Remuneration and nomination committee
25 July 2016
21 Games Workshop Group PLC
REMUNERATION REPORT continued
Policy report
This part of the report sets out the directors’ remuneration policy, which has applied since the AGM held on 16 September 2015 where it
was approved by shareholders. The policy will apply until the AGM in 2018 (unless revised by a vote of shareholders before that time) save
that at this year’s AGM there will be a resolution proposed to remove the amendment that was made in 2015 to the remuneration policy
regarding paying consultancy fees to non-executive directors in circumstances in which they provide to the Company (at the request of the
Company) additional services.
Games Workshop is a most individual business. We have a simple strategy: to 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.
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 the need 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.
22 Games Workshop Group PLC
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.
Participation in the
sharesave scheme creates
staff alignment with the
Group and promotes a
sense of ownership.
Pension
To provide cost effective
retirement benefits.
Profit share
Rewards performance
against annual targets
linked to the achievement
of sales growth.
Non-executive
directors’ fees
Sole element of non-
executive director
remuneration set at a level
that reflects market
conditions.
Performance metrics
Not applicable.
Not applicable.
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.
Not applicable.
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.
Sharesave contributions
are as permitted in
accordance with the
relevant tax legislation.
Up to 7.5% of salary up to
a maximum of £10,000 per
annum. Following the
recent changes in pension
tapering, any excess
between 7.5% of salary
and £10,000 is paid as
additional salary (net of
employers’ national
insurance).
Maximum potential value
is £250 per person per
year.
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.
Operation
The executive directors
each receive life assurance
cover.
The sharesave scheme is a
HMRC approved monthly
savings scheme facilitating
the purchase of shares at a
discount.
Where appropriate other
benefits may be offered
including allowances for
relocation and other
expatriate benefits.
Participation in a group
personal pension scheme.
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.
Fees are reviewed annually
taking into account time
commitment,
responsibilities and fees
paid by comparable
companies.
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.
23 Games Workshop Group PLC
REMUNERATION REPORT continued
Explanation of the performance metrics chosen
The performance measures selected are aligned with the Company’s strategy and business objectives. The profit share is based on 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
402
402
402
500
400
300
200
100
0
Fixed
Variable
193
193
193
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
29 May 2016 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.
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, would be limited to the amount of salary that would 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
24 Games Workshop Group PLC
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
16 September 2015
16 September 2015
16 September 2015
17 September 2014
Notice period
12 months
12 months
Notice period
6 months
6 months
6 months
6 months
Directors’ service contracts and letters of appointment continued
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 each 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 directorship.
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 in
addition to 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.
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 31 May 2015 and 29 May 2016.
Year ended 29 May 2016
K D Rountree
R F Tongue
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
Total
Year ended 31 May 2015
Salary/fees
£000
363
173
221
60
52
52
921
Taxable benefits
£000
-
-
-
-
-
-
-
K D Rountree
R F Tongue *
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
Total
*appointed 1 January 2015
Salary/fees
£000
283
72
346
60
52
52
865
Taxable benefits
£000
-
-
2
-
-
-
2
Profit share
£000
-
-
-
-
-
-
-
Profit share
£000
-
-
-
-
-
-
-
Sharesave
£000
-
-
-
-
-
-
-
Sharesave
£000
9
4
-
-
-
-
13
Pension related
benefits
£000
39
20
-
-
-
-
59
Pension related
benefits
£000
32
9
26
-
-
-
67
Total
£000
402
193
221
60
52
52
980
Total
£000
324
85
374
60
52
52
947
25 Games Workshop Group PLC
REMUNERATION REPORT continued
Annual report on remuneration (subject to audit) continued
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 nil (2015: £66,185) 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 £35,000 in the year (2015:
£25,000). As noted above, the consultancy agreement with T H F Kirby has been terminated.
During 2015/16 and 2014/15 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
2013*
£000
774
-
2013
£000
132
54
T H F Kirby
2014
£000
511
-
2015**
£000
291
-
K D Rountree
2015
£000
168
-
2016
£000
402
-
*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 2015/16 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
CEO
0%
Wider workforce
+1%
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 29 May 2016, compared to the year ended 31 May 2015:
Total staff costs
Profit attributable to owners
Dividends declared
2016
£000
49,765
13,496
12,837
2015
£000
46,846
12,257
16,601
% change
+6%
+10%
-23%
Statement of voting at the last AGM
At the last AGM, votes on the remuneration report and policy were cast as follows:
To approve the remuneration report
To approve the remuneration policy
Votes for
22,122,138
14,020,408
% of vote
98.0%
62.1%
Votes against
340,627
3,910,170
% of vote
1.5%
17.3%
Votes withheld
110,880
4,643,067
% of vote
0.5%
20.6%
26 Games Workshop Group PLC
Implementation statement
A summary of the remuneration arrangements in 2015/16 and how the policy will be applied during 2016/17 is set out below:
Salary and fees
As noted above, in May 2016 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.
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
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
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 and nomination 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 Company’s investor relations website.
Advisers
As referred to above, in May 2016 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 2015/16 year for its advice was £5,000.
Directors' interests in shares of the Company
The directors' interests (including their families) in the shares of the Company were as follows:
As at
29 May 2016
ordinary shares
of 5p each
As at
31 May 2015
ordinary shares
of 5p each
Beneficial
20,473
4,700
2,108,650
66,500
20,000
1,500
Non-
beneficial
-
3,300
25,536
-
-
-
Beneficial
15,945
4,700
2,108,650
66,500
20,000
1,500
Non-
beneficial
-
3,300
25,444
-
-
-
K D Rountree
R F Tongue
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
Share options
Share options granted to the directors under the sharesave scheme were as follows:
K D Rountree
R F Tongue
At 31 May 2015
3,924
3,924
Exercised
-
-
Granted
-
-
Number as at
29 May 2016
3,924
3,924
Exercise dates
Commencement Expiry
Apr-18
Nov-17
Apr-18
Nov-17
Exercise
price
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.
On 3 June 2016, K D Rountree acquired 831 of the Company’s shares under the Company’s dividend reinvestment plan. This is the only
movement in directors’ interests in shares of the Company between 29 May 2016 and the date of this report.
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 29 May 2016 and the date of this report.
27 Games Workshop Group PLC
REMUNERATION REPORT continued
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.
250
200
150
100
50
0
2011
Games Workshop
FTSE Small Cap
2012
2013
2014
2015
2016
On behalf of the board
N J Donaldson
Chairman
Remuneration and nomination committee
25 July 2016
28 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 30, 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
25 July 2016
29 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
30 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 29 May 2016 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
The financial statements, included within the annual report, comprise:
the Group and Company balance sheets as at 29 May 2016;
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 IFRSs as adopted by the European
Union, and as applicable law 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: £847,000 (2015: £825,000) which represents 5% of operating profit
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 and the plc company.
The audited reporting units accounted for 86% of consolidated revenues and 91% of consolidated operating
profit.
Areas of focus Capitalisation of product development costs.
Inventory valuation.
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 below. 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.
31 Games Workshop Group PLC
INDEPENDENT AUDITORS’ REPORT continued
Area of focus
How our audit addressed the area of focus
Capitalisation of product development costs
Refer to page 18 (audit committee report), page 42 (Key
assumptions and estimates) and page 48 (notes).
The Group incurred £4.6 million of capitalised product
development costs during the year to 29 May 2016, relating to
products the Group develops to sell through its various channels.
The net book value of such capitalised costs as at 29 May 2016
was £4.2 million.
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
estimation in particular as regards to whether they are specific to
projects which are expected to generate future cash inflows and
also the recoverability of the costs based on expected product
sales.
Inventory valuation
Refer to page 18 (audit committee report), page 42 (Key
assumptions and estimates) and page 51 (notes).
The Group held inventory of £8.5 million as at 29 May 2016. 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 £0.7
million of inventory per annum.
In order to assess the level of provision required against
inventory, the directors assess forecast sales levels by product.
The provision calculation is subject to manual adjustment to
reflect the specific circumstances of certain inventory lines, for
example, consumables, discontinued product lines and new
products.
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.
We assessed whether the costs capitalised relating to product
development met the criteria set within IAS 38 ‘Intangible assets’. We
agreed a sample 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 FY16 sales
to forecasts made in previous years and evaluated the historical
accuracy of the directors’ estimates. 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
historical accuracy of the directors’ forecasting.
We tested that the Group’s provisioning policy is in accordance with
IFRSs as adopted by the EU and has been consistently applied. We
understood and assessed manual adjustments to the provision
calculation to determine whether they were appropriate. No
inappropriate adjustments were identified.
We obtained an understanding of the directors’ process for preparing
future stock sales forecasts, including how these were challenged and
stress-tested by the directors. We tested the integrity of the underlying
calculations and assessed the assumptions over future sales forecasts
by testing via recalculation the accuracy of the historic sales forecasts
compared to actual outturn. We noted no material differences
between historical forecasts and actual out-turn and were therefore
satisfied that the directors forecasting process was reasonable.
We obtained further evidence over the valuation of the provision by
comparing a sample of product lines to post-year end sales and
assessing whether performance suggested that additional provisions
may be required. This also provided us with evidence over the accuracy
of the directors’ sales forecasts used in calculating the provision. No
material errors were noted.
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, in addition to the plc company, we identified five reporting units that, in our view, required an
audit of their complete financial information, owing to their financial significance to the Group. Together, these five units and the plc
company, accounted for 86% of consolidated revenues and 91% of consolidated operating profit. The audit of all six units was performed
by the group engagement team. 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 on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and on the financial statements as a whole.
32 Games Workshop Group PLC
Materiality continued
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality
£847,000 (2015: £825,000).
How we determined it
5% of operating profit before exceptional items.
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 (2015:
£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 16, in relation to going concern. We have
nothing to report having performed our review. Under ISAs (UK & Ireland) we are required to report to you if we have anything material to
add or draw attention to in relation to the directors’ statement about whether they considered it appropriate to adopt the going concern
basis in preparing the financial statements. We have nothing material to add or draw attention to. As noted in the directors’ statement, the
directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. 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 17 to 20 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.
-
We have no exceptions to
report.
the statement given by the directors on page 29, 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 position and performance, business model and strategy is materially inconsistent with our
knowledge of the group and company acquired in the course of performing our audit.
We have no exceptions to
report.
the section of the annual report on page 18, 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.
The directors’ assessment of the prospects of the group and the principal risks that would threaten the solvency or liquidity of the group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw your attention to in relation to:
the directors confirmation on page 11 of the annual report, in accordance with provisions C.2.1 of the
Code, that they have carried out a robust assessment of the principal risks facing the group , including
those that would threaten its business model, future performance, solvency or liquidity.
the disclosures in the annual report that describe those risks and explain how they are being managed or
mitigated.
the directors’ explanations on page 16 of the annual report, in accordance with provision C.2.2 of the
Code, as to how they have assessed the prospects of the group, over what period they have done so and
why they consider that period to be appropriate, and their statement as to whether they have
reasonable expectation that the group will be able to continue in operation and meet its liabilities as they
fall due over the period of their assessment, including any related disclosures drawing attention to any
necessary qualification or assumptions.
We have nothing material
to add or to draw attention
to.
We have nothing material
to add or to draw attention
to.
We have nothing material
to add or to draw attention
to.
33 Games Workshop Group PLC
INDEPENDENT AUDITORS’ REPORT continued
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of the principal
risk facing the Group and the directors’ statement in relation to the longer term visibility of the Group. Our review was substantially less in
scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking
that the statements are in alignment with the relevant provisions of the Code; and considering whether the statement are consistent with
the knowledge acquired by us in the course of performing our audit. We have nothing to report having performed our review.
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 statement 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 ten further provisions of the
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 29, 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
25 July 2016
34 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
Notes
3
3,4
5
3
7
8
9
10
27
Year ended
Year ended
29 May 2016
£000
118,069
(37,438)
80,631
(69,710)
5,939
-
16,860
93
(5)
16,948
(3,452)
13,496
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
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
Year ended
Year ended
29 May 2016
42.1p
42.0p
42.1p
42.0p
31 May 2015
38.3p
38.3p
38.2p
38.1p
STATEMENTS OF COMPREHENSIVE INCOME
Notes
Profit attributable to owners of the parent
Other comprehensive income/(expense)
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income/(expense) for the period
Total comprehensive income attributable to owners of the parent
26
Group
Year ended
29 May 2016
£000
13,496
Year ended
31 May 2015
£000
12,257
Company
Year ended
29 May 2016
£000
13,363
Year ended
31 May 2015
£000
16,159
485
485
13,981
(473)
(473)
11,784
-
-
13,363
-
-
16,159
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 39 to 58 are an integral part of these financial statements.
35 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
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
29 May 2016
£000
31 May 2015
£000
29 May 2016
£000
31 May 2015
£000
13
14
15
16
19
17
18
19
20
22
24
23
24
25
25
26
27
1,433
10,501
22,621
-
929
3,219
38,703
8,540
10,120
725
11,775
31,160
69,863
(12,844)
(1,924)
(823)
(15,591)
15,569
(488)
(621)
(1,109)
53,163
1,606
10,519
1,667
39,371
53,163
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
-
-
-
30,584
3,900
43
34,527
-
1,516
-
843
2,359
36,886
(718)
-
-
(718)
1,641
(141)
-
(141)
36,027
1,606
10,519
101
23,801
36,027
-
-
-
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
The notes on pages 39 to 58 are an integral part of these financial statements.
The financial statements on pages 35 to 58 were approved by the board of directors on 25 July 2016 and were signed on its behalf by:
K D Rountree, Director
R F Tongue, Director
Registered number 2670969
36 Games Workshop Group PLC
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
At 1 June 2014 and 2 June 2014
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
Called up
share capital
£000
1,593
Share
premium
account
£000
9,490
Other reserves
(note 26)
£000
1,655
-
-
-
-
10
-
-
-
10
-
-
-
-
728
-
-
-
728
-
(473)
(473)
-
-
-
-
-
-
Retained
earnings
(note 27)
£000
42,656
12,257
-
12,257
232
-
(71)
49
(16,601)
(16,391)
Total
equity
£000
55,394
12,257
(473)
11,784
232
738
(71)
49
(16,601)
(15,653)
At 31 May 2015 and 1 June 2015
1,603
10,218
1,182
38,522
51,525
Profit for the year to 29 May 2016
Exchange differences on translation of foreign operations
Total comprehensive income for the period
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme (note 25)
Current tax charge relating to exercised share options
Dividends paid to Company shareholders
Total transactions with owners
At 29 May 2016
-
-
-
-
3
-
-
3
1,606
-
-
-
-
301
-
-
301
10,519
-
485
485
-
-
-
-
-
1,667
COMPANY STATEMENT OF CHANGES IN TOTAL EQUITY
At 1 June 2014 and 2 June 2014
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
Called up
share capital
£000
1,593
Share
premium
account
£000
9,490
Capital
redemption
reserve
£000
101
-
-
-
10
-
10
-
-
-
728
-
728
-
-
-
-
-
-
13,496
-
13,496
193
-
(3)
(12,837)
(12,647)
39,371
Retained
earnings
£000
23,292
16,159
16,159
232
-
(16,601)
(16,369)
13,496
485
13,981
193
304
(3)
(12,837)
(12,343)
53,163
Total
equity
£000
34,476
16,159
16,159
232
738
(16,601)
(15,631)
At 31 May 2015 and 1 June 2015
1,603
10,218
101
23,082
35,004
Profit for the year to 29 May 2016
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 29 May 2016
-
-
-
3
-
3
1,606
-
-
-
301
-
301
10,519
-
-
-
-
-
-
101
13,363
13,363
13,363
13,363
193
-
(12,837)
(12,644)
23,801
193
304
(12,837)
(12,340)
36,027
The notes on pages 39 to 58 are an integral part of these financial statements.
37 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
Notes
28
28
14
25
12
20
The notes on pages 39 to 58 are an integral part of these financial statements.
Group
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
Company
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
26,782
(2,236)
(316)
24,230
(5,296)
-
(2,789)
(4,578)
86
(12,577)
304
(3)
(12,837)
(12,536)
(883)
12,561
97
11,775
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
13,234
-
-
13,234
15,585
-
-
15,585
-
-
-
-
70
70
304
-
(12,837)
(12,533)
771
71
1
843
-
-
-
-
84
84
738
-
(16,601)
(15,863)
(194)
266
(1)
71
38 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), IFRS
Interpretations Committee 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 29 May 2016 and 31 May 2015.
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 29 May 2016
and 31 May 2015, have been used for consolidation purposes. In addition the first set of financial statements for Games Workshop Malaysia Sdn. Bhd. will
be prepared to 31 May 2017 and hence the management accounts prepared to 29 May 2016 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 are 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
39 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
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.
Share-based payment
The Group operates a number of equity-settled employee sharesave schemes. The fair value of the employee services received under such schemes is
recognised as an expense in the income statement with a corresponding increase in equity over the vesting period.
Investments
Shares and loans in subsidiary undertakings are stated at cost less provision for impairment.
40 Games Workshop Group PLC
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 (2015: 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.
Financial instruments
All financial assets are classified as 'loans and receivables' and financial liabilities as 'other financial liabilities' (measured at amortised cost) in accordance
with IAS 39. Management determines the classification of its financial assets and liabilities at initial recognition.
41 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
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 a credit in the prior period in relation to the release of amounts previously provided for the continental european
reorganisation.
New accounting standards
There are no new accounting standards or interpretations effective in the current period which are relevant to the Group.
New standards, amendments to standards and interpretations which have been published but are not yet effective which are relevant to the Group are:
-
-
IFRS 16 ‘Leases’ (effective for the year ending 31 May 2020). Under this new standard all leases will be required to be recognised on balance sheet.
Currently under IAS 17 ‘Leases’ only leases categorised as finance leases are recognised on balance sheet, with leases categorised as operating
leases not recognised. In broad terms the impact will be to recognise a lease liability and corresponding asset for the operating lease commitments
set out in note 30. The Group is assessing the impact of the new standard.
IFRS 15 ‘Revenue from contracts with customers’ (effective for the year ending 2 June 2019). Under this new standard the royalty minimum
guarantee income is expected to be taken as revenue up front. Currently the minimum guarantee income is deferred and released in line with
licensee sales.
The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant
effect on the financial statements.
3. Segment information
As Games Workshop is a vertically integrated business, management assesses the performance of sales channels and manufacturing and distribution
channels separately. At 29 May 2016, 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. This also includes adjustments for the profit in stock arising from inter-segment sales and charges for
inventory provisions.
Central costs. These include the Company overheads, head office site costs, and the costs of running the Games Workshop Academy.
Service centre costs. Provides support services (IT, accounting, payroll, personnel, procurement, legal, customer services and credit control) 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 payment’. 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 29 May 2016 is as follows:
Trade
Retail
Mail order
Total revenue
42 Games Workshop Group PLC
External revenue
Year ended
29 May 2016
£000
44,522
48,414
25,133
118,069
Restated*
Year ended
31 May 2015
£000
44,477
49,060
25,595
119,132
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
Asia
Non-core trade
Total Trade
Retail
UK
Continental Europe
North America
Australia and New Zealand
Asia
Non-core retail
Total Retail
Mail order
Citadel and Forge World
Non-core mail order
Total Mail order
Total external revenue
Year ended
29 May 2016
£000
Restated*
Year ended
31 May 2015
£000
15,504
17,944
1,658
741
8,675
44,522
16,074
12,878
10,417
5,133
417
3,495
48,414
21,018
4,115
25,133
15,656
17,740
2,000
584
8,497
44,477
16,959
13,879
9,806
5,619
317
2,480
49,060
21,120
4,475
25,595
118,069
119,132
*Revenue of £301,000 relating to certain trade customers for the year ended 31 May 2015 has been reclassified from UK and Continental Europe trade into
non-core trade above to reflect the way in which the business is structured at 29 May 2016. In addition £537,000 of revenue has been reclassified from UK
retail to UK and Continental Europe trade in order to correct a classification error relating to foreign exchange differences in the prior year.
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 segment operating expenses
Share-based payment charge
Total group operating expenses
Year ended
29 May 2016
£000
(8,899)
(35,930)
(5,002)
(2,767)
(5,582)
(10,907)
(430)
(69,517)
Restated**
Year ended
31 May 2015
£000
(7,945)
(33,934)
(4,135)
(3,111)
(6,206)
(11,215)
(429)
(66,975)
(232)
(67,207)
(193)
(69,710)
Total segment operating profit is as follows and is reconciled to profit before taxation below:
Trade
Retail
Mail order
Product and supply
Central costs
Service centre costs
Royalties
Total segment operating profit
Share-based payment charge
Finance income
Finance costs
Profit before taxation
Year ended
29 May 2016
£000
10,625
(3,410)
13,747
7,093
(5,424)
(10,907)
5,329
17,053
Restated**
Year ended
31 May 2015
£000
11,508
(1,510)
14,432
8,606
(6,179)
(11,217)
1,069
16,709
(193) (232)
109
(1)
16,585
93
(5)
16,948
**Segment operating expenses and segment operating profit for the year ended 31 May 2015 have been restated to exclude the share-based payment
charge of £232,000. This is now shown as a separate item above.
43 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
3. Segment information continued
In addition charges relating to changes in inventory provisions are now all shown within the product and supply segment. A charge of £37,000 for the year
ended 31 May 2015 has been reclassified from retail to product and supply to reflect this.
An exceptional credit of £42,000 for the year ended 31 May 2015 has been included within the product and supply segment, being the release of amounts
previously provided for the continental european reorganisation.
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
Impairment, depreciation and
amortisation
Year ended
29 May 2016
£000
(3)
(1,439)
(983)
(7,147)
(9)
(837)
(10,418)
Year ended
31 May 2015
£000
(2)
(1,307)
(927)
(7,909)
(116)
(829)
(11,090)
Net charge to inventory
provisions
Redundancy costs and
compensation for loss of office
Year ended
29 May 2016
£000
-
-
-
(1,805)
-
(1,805)
Restated**
Year ended
31 May 2015
£000
-
-
-
(1,247)
-
(1,247)
Year ended
29 May 2016
£000
(25)
(150)
(17)
(51)
(293)
(536)
Year ended
31 May 2015
£000
(20)
(712)
(18)
-
(819)
(1,569)
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
29 May 2016
£000
33,021
32,391
40,788
10,981
888
118,069
Year ended
31 May 2015
£000
32,999
33,515
39,864
11,732
1,022
119,132
2016
£000
32,458
3,026
35,484
2015
£000
30,777
2,832
33,609
Tangible and intangible asset additions included within the UK were £11,307,000 (2015: £11,867,000) and all other countries were £1,248,000 (2015:
£581,000). Development costs of £2,892,000 and additions of £3,129,000 classified within all other countries in 2015 are now classified within the UK.
4. Operating expenses – pre-exceptional items
Selling costs
Administrative expenses
44 Games Workshop Group PLC
Year ended
29 May 2016
£000
41,991
27,719
69,710
Year ended
31 May 2015
£000
39,596
27,611
67,207
5. Exceptional items
The exceptional credit of £42,000 reported in the prior period relates to the release of amounts previously provided for the continental european
restructure.
6. Directors and employees
Total directors’ and employees’ costs:
Wages and salaries
Social security
Other pension costs
Share-based payment
Group
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
Company
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
42,931
4,711
1,930
193
49,765
40,246
4,497
1,871
232
46,846
1,420
178
75
3
1,676
1,543
150
106
1
1,800
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 15.
Short-term employee benefits
Post-employment benefits
Share-based payment
Other long term employee benefits
Year ended
29 May 2016
£000
1,110
84
5
-
1,199
Year ended
31 May 2015
£000
1,051
93
1
2
1,147
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
Group
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 9 (2015: 11).
7. Finance income
-
Interest income:
- On cash and cash equivalents
- Other interest income receivable
8. Finance costs
Interest expense:
- Unwinding of discount on provisions
- Other interest payable
-
-
45 Games Workshop Group PLC
Year ended
29 May 2016
Number
Year ended
31 May 2015
Number
209
160
826
186
364
1,745
167
146
824
169
348
1,654
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
93
-
93
103
6
109
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
2
3
5
-
1
1
-
-
-
-
-
-
-
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS continued
9. Profit before taxation
Profit before taxation is stated after charging:
Depreciation:
- Owned property, plant and equipment
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)
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 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
(Over)/under provision in respect of prior periods
Tax expense recognised in the income statement
Current tax charge/(credit) relating to sharesave scheme
Deferred tax charge relating to sharesave scheme
Charge taken directly to equity
46 Games Workshop Group PLC
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
5,305
28
1,232
3,853
3,895
41,016
242
7,640
463
197
139
17,967
1,805
28
39
536
562
4,991
9
1,362
4,728
3,186
40,794
135
7,645
448
234
130
18,379
1,247
33
24
1,569
236
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
53
120
9
182
53
122
12
187
Year ended
29 May 2016
£000
Year ended
31 May 2015
£000
2,588
40
-
2,628
349
(32)
2,945
660
(153)
3,452
3
-
3
3,165
253
9
3,427
347
(539)
3,235
893
200
4,328
(49)
71
22
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% (2015: 20.83%)
Effects of:
Items not (assessable)/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
29 May 2016
£000
16,948
3,390
Year ended
31 May 2015
£000
16,585
3,455
(248)
(2)
457
(145)
3,452
481
(4)
482
(86)
4,328
A change to the UK corporation tax rate was announced in the Chancellor's Budget on 16 March 2016. The change announced is to reduce the main rate to
17% from 1 April 2020. Changes to reduce the UK corporation tax rate to 19% from 1 April 2017 and to 18% from 1 April 2020 had already been
substantively enacted on 26 October 2015. The overall effect of these 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
29 May 2016
13,496
32,093
42.1
Year ended
31 May 2015
12,257
31,975
38.3
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
29 May 2016
13,496
32,093
42.1
Year ended
31 May 2015
12,215
31,975
38.2
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
29 May 2016
13,496
32,093
57
32,150
42.0
Year ended
31 May 2015
12,257
31,975
50
32,025
38.3
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)
Year ended
29 May 2016
13,496
32,093
57
32,150
42.0
Year ended
31 May 2015
12,215
31,975
50
32,025
38.1
47 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
12. Dividends per share
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 prior period. A
dividend of 20 pence per share, amounting to a total dividend of £6,413,000, and a further dividend of 20 pence per share, amounting to a total dividend of
£6,424,000, were declared and paid during the current period.
13. Goodwill
Group
Cost
At 31 May 2015 and 1 June 2015
Exchange differences
At 29 May 2016
Accumulated amortisation
At 31 May 2015 and 1 June 2015
Exchange differences
At 29 May 2016
Net book value at beginning of period and end of period
The Company had no goodwill at either period end.
£000
2,402
3
2,405
(969)
(3)
(972)
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 three 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% (2015: 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 5% (2015: 6%).
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 1 June 2014 and 2 June 2014
Additions
Exchange differences
Disposals
At 31 May 2015 and 1 June 2015
Additions
Exchange differences
Disposals
At 29 May 2016
Accumulated amortisation
At 1 June 2014 and 2 June 2014
Amortisation charge
Exchange differences
Disposals
At 31 May 2015 and 1 June 2015
Amortisation charge
Exchange differences
Disposals
At 29 May 2016
Net book amount
At 31 May 2015
At 29 May 2016
48 Games Workshop Group PLC
Computer
software
£000
Development
costs
£000
9,625
1,116
24
(265)
10,500
2,784
74
(18)
13,340
(4,617)
(1,362)
(26)
241
(5,764)
(1,232)
(73)
16
(7,053)
4,736
6,287
24,912
4,579
-
(1,753)
27,738
4,578
-
(2,484)
29,832
(21,237)
(4,728)
-
1,753
(24,212)
(3,853)
-
2,447
(25,618)
3,526
4,214
Total
£000
34,537
5,695
24
(2,018)
38,238
7,362
74
(2,502)
43,172
(25,854)
(6,090)
(26)
1,994
(29,976)
(5,085)
(73)
2,463
(32,671)
8,262
10,501
14. Other intangible assets continued
Amortisation of £3,954,000 (2015: £4,990,000) has been charged in cost of sales and £1,131,000 (2015: £1,100,000) in operating expenses.
The net book amount of internally generated intangible assets is £6,557,000 (2015: £3,939,000) and acquired intangible assets is £3,944,000 (2015:
£4,323,000). All development costs are internally generated and £3,964,000 (2015: £3,296,000) is capitalised salary costs.
Salary costs of £4,306,000 (2015: £4,280,000) were capitalised as part of development costs and £548,000 (2015: £nil) were capitalised as part of computer
software during the year.
Assets in the course of development, and not amortised, amount to £2,811,000 (2015: £1,048,000) with current and prior year amounts both being included
within computer software. The current year assets are: the replacement of the mail order warehouse software (£656,000), the replacement of the ERP
system (£2,038,000) and software licenses for the global web store (£117,000). The prior year related to the development of the Forge World web store
(£755,000), replacement of the mail order warehouse software (£290,000) and upgrade of till software (£3,000).
The Company had no other intangible assets at either period end.
15. Property, plant and equipment
Group
Cost
At 1 June 2014 and 2 June 2014
Additions
Exchange differences
Disposals
At 31 May 2015 and 1 June 2015
Additions
Exchange differences
Disposals
Reclassification
At 29 May 2016
Accumulated depreciation
At 1 June 2014 and 2 June 2014
Charge for the period
Exchange differences
Impairment
Disposals
At 31 May 2015 and 1 June 2015
Charge for the period
Exchange differences
Impairment
Disposals
At 29 May 2016
Net book amount
At 31 May 2015
At 29 May 2016
Fixtures
and
fittings
£000
18,807
1,373
(345)
(1,807)
18,028
1,806
377
(1,522)
173
18,862
(16,057)
(1,230)
333
(12)
1,771
(15,195)
(1,339)
(326)
(28)
1,502
(15,386)
Moulding
tools
£000
26,198
1,665
1
(1,364)
26,500
2,154
-
(662)
-
27,992
(21,557)
(1,891)
(1)
-
1,363
(22,086)
(1,986)
-
-
662
(23,410)
Total
£000
76,106
6,753
(309)
(4,670)
77,880
5,193
496
(2,905)
-
80,664
(55,079)
(4,991)
307
(9)
4,611
(55,161)
(5,305)
(426)
(28)
2,877
(58,043)
Freehold
land and
buildings
£000
Plant and
equipment
and vehicles
£000
16,295
1,791
35
(1,499)
16,622
1,204
119
(721)
-
17,224
(12,689)
(1,578)
(25)
3
1,477
(12,812)
(1,625)
(100)
-
713
(13,824)
14,806
1,924
-
-
16,730
29
-
-
(173)
16,586
(4,776)
(292)
-
-
-
(5,068)
(355)
-
-
-
(5,423)
11,662
11,163
3,810
3,400
2,833
3,476
4,414
4,582
22,719
22,621
Depreciation expense of £3,199,000 (2015: £2,954,000) has been charged in cost of sales, £1,307,000 (2015: £1,308,000) in selling costs and £799,000 (2015:
£729,000) in administrative expenses.
Freehold land amounting to £3,836,000 (2015: £3,836,000) has not been depreciated.
Assets in the course of construction, and not depreciated, amount to £1,085,000 (2015: £1,103,000). £570,000 (2015: £495,000) of these are included in
moulding tools, £373,000 (2015: £417,000) is included in plant and equipment and vehicles, £26,000 (2015: £51,000) is included in freehold land and
buildings, and £116,000 (2015: £140,000) is included in fixtures and fittings above.
An impairment of £28,000 (2015: £12,000) relates to fixtures and fittings and a reversal of £nil (2015: £3,000) 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.
The Company held no property, plant and equipment at either period end.
49 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
16. Investments in subsidiaries
Company
Shares in group undertakings – cost
Beginning of period and end of period
Investments in group undertakings are stated at cost less any provision for impairment.
A list of subsidiary undertakings is given below.
Interests in group undertakings
2016
£000
2015
£000
30,584
30,584
Description of
shares held
£1 ordinary
$1 common
stock
Can $1
euro 1
euro 1
Aus $1
euro 1
NZ $1
euro 1
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
Italy
England and
Wales
England and
Wales
England and
Wales
China
England and
Wales
Sweden
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
£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
Games Workshop Hong Kong Limited
Hong Kong
HK $1 ordinary
Games Workshop Pte. Limited
Singapore
SG $1 ordinary
Games Workshop Malaysia Sdn. Bhd.
Malaysia
MYR 1 ordinary
Games Workshop Interactive Limited
Warhammer Online Limited
Citadel Miniatures Limited
Games Workshop Limited
England and
Wales
England and
Wales
England and
Wales
Hong Kong
£1 ordinary
100%
£1 ordinary
£1 ordinary
100%
HK$10 ordinary
100%
100%
100%
100%
100%
Distributor and retailer of games
and miniatures
Distributor of games
and miniatures
Distributor of games
and miniatures
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.
50 Games Workshop Group PLC
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 1 June 2014 and 2 June 2014
(Charged)/credited to the income statement
Charged to equity
Exchange differences
At 31 May 2015 and 1 June 2015
Credited/(charged) to the income statement
Exchange differences
At 29 May 2016
Group
Company
2016
£000
2,274
945
3,219
2015
£000
2,379
1,242
3,621
2016
£000
2
41
43
Company
Group
2016
£000
3,621
105
(507)
-
3,219
2015
£000
4,715
70
(1,093)
(71)
3,621
Accelerated
depreciation
£000
1,479
(101)
-
(84)
1,294
49
19
1,362
Development
costs
£000
(772)
67
-
-
(705)
(138)
-
(843)
Losses
available
for offset
£000
2,227
(549)
-
109
1,787
(401)
65
1,451
2016
£000
7
-
36
-
43
Other
£000
1,781
(510)
(71)
45
1,245
(17)
21
1,249
2015
£000
2
5
7
2015
£000
6
-
1
-
7
Total
£000
4,715
(1,093)
(71)
70
3,621
(507)
105
3,219
Other deferred tax assets include deferred tax on adjustments for profit in stock arising from intra-group sales of £861,000 (2015: £948,000).
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 29 May 2016 or 31 May 2015 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 1 June 2014 and 2 June 2014
Credited to the income statement
At 31 May 2015 and 1 June 2015
Credited to the income statement
At 29 May 2016
18. Inventories
Group
Raw materials
Work in progress
Finished goods and goods for resale
Accelerated
depreciation
£000
2
-
2
-
2
Other
£000
4
1
5
36
41
2016
£000
120
365
8,055
8,540
Total
£000
6
1
7
36
43
2015
£000
98
230
7,297
7,625
The Group holds no inventories at fair value less costs to sell.
During the period, the Group utilised an inventory provision of £916,000 (2015: £1,189,000) and £1,805,000 (2015: £1,247,000) has been charged to the
income statement.
The Company holds no inventories at either period end.
51 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
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
2016
£000
4,537
(259)
4,278
5,304
1,467
-
-
11,049
206
723
-
929
10,120
2015
£000
4,740
(252)
4,488
4,787
1,345
-
-
10,620
181
1,014
-
1,195
9,425
2016
£000
-
-
-
20
-
1,496
3,900
5,416
-
-
3,900
3,900
1,516
2015
£000
-
-
-
38
-
1,142
3,900
5,080
-
-
3,900
3,900
1,180
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
2016
2015
Not impaired
£000
1,090
68
-
1,158
Impaired
£000
34
47
60
141
Total
£000
1,124
115
60
1,299
Not impaired
£000
172
-
-
172
Impaired
£000
18
83
51
152
Total
£000
190
83
51
324
In addition to the above, current debt of £118,000 (2015: £100,000) has been impaired.
Provision for impairment of receivables
Movements on the provision for impairment of trade receivables are as follows:
Group
At 1 June 2014 and 2 June 2014
Charge for the period
Exchange differences
Receivables written off during the period as uncollectible
At 31 May 2015 and 1 June 2015
Charge for the period
Exchange differences
Receivables written off during the period as uncollectible
At 29 May 2016
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
52 Games Workshop Group PLC
£000
370
144
(9)
(253)
252
242
1
(236)
259
2015
£000
4,907
2,167
2,142
1,404
10,620
2016
£000
5,007
2,080
2,360
1,602
11,049
20. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
Cash and cash equivalents
Group
Company
2016
£000
10,998
777
11,775
2015
£000
11,942
619
12,561
2016
£000
843
-
843
2015
£000
71
-
71
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 29 May 2016 or 31 May 2015.
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
15% appreciation of the US dollar (2015: 10%)
15% appreciation of the euro (2015: 10%)
A depreciation of the stated currencies would have an equal and opposite effect.
There is no impact on equity gains or losses.
2016
Income
gain/(loss)
£000
251
(187)
2015
Income
gain/(loss)
£000
27
(35)
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.
53 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
21. Financial risk factors continued
Capital risk
The capital structure of the Group consists of net funds (see note 29) and owners’ equity (see notes 25 to 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
2016
Between
1 and 2
years
£000
141
159
-
300
Between
2 and 5
years
£000
-
124
-
124
Within
1 year
£000
9,144
614
-
9,758
More
than
5 years
£000
-
-
-
-
2015
Between
1 and 2
years
£000
-
71
-
71
Within
1 year
£000
9,406
337
26
9,769
Between
2 and 5
years
£000
-
61
-
61
Within
1 year
2016
£000
675
675
More
than
5 years
£000
-
-
-
-
Within
1 year
2015
£000
691
691
Group
Loans and receivables
2015
£000
2016
£000
Company
Loans and receivables
2015
£000
2016
£000
4,278
696
1,467
-
-
11,775
18,216
4,488
-
1,345
-
-
12,561
18,394
-
-
-
1,496
3,900
843
6,239
-
-
-
1,142
3,900
71
5,113
Within the Group net cash and cash equivalents are overdrafts of £7,938,000 (2015: £4,276,000) 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
2015
£000
2016
£000
4,417
2,473
2,395
-
9,285
4,608
2,692
2,736
-
10,036
Company
Financial liabilities at
amortised cost
2015
£000
2016
£000
5
8
343
319
675
12
264
91
324
691
Deferred income balances and other taxes and social security payables have been excluded from the above as they are not financial liabilities.
54 Games Workshop Group PLC
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
2016
£000
4,417
1,042
2,473
2,917
1,995
-
12,844
Company
2016
£000
2015
£000
2015
£000
4,608
289
2,692
2,849
2,693
-
13,131
5
43
8
343
-
319
718
12
47
264
91
-
324
738
Group
2016
£000
488
2015
£000
364
Company
2016
£000
141
2015
£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:
Sterling
Euro
US dollar
Other currencies
Total trade and other payables and other non-current liabilities
24. Provisions
Analysis of total provisions:
Group
Current
Non-current
Total provisions
Group
At 31 May 2015
Charged/(credited) to the income statement:
-
Additional provisions
- Unused amounts reversed
Exchange differences
Utilised
At 29 May 2016
2016
£000
7,521
1,557
3,346
908
13,332
2015
£000
8,147
1,617
2,830
901
13,495
2016
£000
823
621
1,444
Exceptional
items
£000
26
Employee
benefits
£000
492
Property
£000
469
-
-
-
(26)
-
107
(18)
3
(37)
547
671
(109)
16
(150)
897
2015
£000
529
458
987
Total
£000
987
778
(127)
19
(213)
1,444
The Company had no provisions at either period end. The fair value of provisions does not differ from the book value.
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 2019. The estimated liability is discounted to its present value
using a discount rate of 0.96% (2015: 4.0%).
Exceptional provisions
Exceptional provisions related to committed costs associated with the continental european reorganisation announced in January 2014.
55 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
25. Share capital
Group and Company
At 1 June 2014
Shares issued under employee sharesave scheme
At 31 May 2015
Shares issued under employee sharesave scheme
At 29 May 2016
Number of shares
(thousands)
31,860
204
32,064
57
32,121
Ordinary
shares
£000
1,593
10
1,603
3
1,606
Share
premium
account
£000
9,490
728
10,218
301
10,519
Total
£000
11,083
738
11,821
304
12,125
During the period 57,157 ordinary shares were issued (2015: 203,827). The total authorised number of shares is 42,000,000 shares (2015: 42,000,000 shares)
with a par value of 5p per share (2015: 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
2016
Translation
reserve
£000
2,131
-
101
485
2,616
Other
reserve
£000
(1,050)
-
(1,050)
2015
Capital
redemption
reserve
£000
101
Translation
reserve
£000
2,604
-
101
(473)
2,131
Other
reserve
£000
(1,050)
-
(1,050)
Total
£000
1,182
485
1,667
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 29 May 2016, the Company’s capital redemption reserve was £101,000 (2015: £101,000). The Company had no other reserves in addition to the
capital redemption reserve at either period end.
27. Retained earnings
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 and 1 June 2015
Profit attributable to owners of the parent
Current tax on share options
Share-based payments
Dividends to Company shareholders
At 29 May 2016
28. Reconciliation of profit/(loss) to net cash from operating activities
Operating profit/(loss)
Depreciation of property, plant and equipment
Net impairment 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:
- (Increase)/decrease in inventories
- (Increase)/decrease in trade and other receivables
- (Decrease)/increase in trade and other payables
- - Increase/(decrease) in provisions
Net cash from operating activities
Group
2016
£000
16,860
5,305
28
28
39
3,853
1,232
193
-
(701)
(293)
(198)
436
26,782
56 Games Workshop Group PLC
Group
£000
42,656
12,257
(71)
49
232
(16,601)
38,522
13,496
(3)
193
(12,837)
39,371
Company
£000
23,292
16,159
-
-
232
(16,601)
23,082
13,363
-
193
(12,837)
23,801
Company
2015
£000
16,477
4,991
9
33
24
4,728
1,362
232
-
882
(242)
(395)
(2,522)
25,579
2016
£000
(2,164)
-
-
-
-
-
-
-
15,000
-
273
125
-
13,234
2015
£000
(1,946)
-
-
-
-
-
-
-
17,646
-
(260)
155
(10)
15,585
28. Reconciliation of profit/(loss) to net cash from operating activities continued
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.
2016
£000
28
(28)
-
2015
£000
59
(33)
26
The Group disposed of intangible assets with a net book amount of £39,000 during the period (2015: £24,000). 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
31 May 2015
£000
12,561
12,561
As at
31 May 2015
£000
71
71
Cash
flow
£000
(883)
(883)
Cash
flow
£000
771
771
Exchange
movement
£000
97
97
As at
29 May 2016
£000
11,775
11,775
Exchange
movement
£000
1
1
As at
29 May 2016
£000
843
843
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.
Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are payable as follows:
2016
£000
609
2015
£000
447
Group
Within 1 year
Between 2 and 5 years inclusive
In over 5 years
2016
Other
property
£000
526
493
-
1,019
Retail stores
£000
7,595
11,656
265
19,516
Other
£000
154
148
-
302
Retail stores
£000
6,614
10,647
414
17,675
2015
Other
property
£000
524
846
-
1,370
The Company had no operating lease commitments at either period end.
Inventory purchase commitments
Group
Finished goods
Components
Raw materials
2016
£000
1,462
1,135
92
Other
£000
143
115
-
258
2015
£000
1,216
639
43
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.
57 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
31. Contingencies
The Group has contingent liabilities in respect of the potential reversionary interest in sub-let leasehold properties amounting to £46,000 (2015: £93,000).
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 £1,424,000 (2015: £1,586,000).
For the year ended 29 May 2016, 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.
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
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 Hong Kong Limited
Amounts owed by
subsidiaries
2016
£000
-
1,275
120
4
26
2
2
-
1
18
-
48
1,496
2015
£000
51
978
71
1
23
-
-
-
1
16
1
-
1,142
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
2016
£000
-
382
15,000
2015
£000
517
398
17,129
Amounts owed to
subsidiaries
2016
£000
-
-
-
-
-
-
-
(319)
-
-
-
-
(319)
2015
£000
-
-
-
-
-
(5)
-
(319)
-
-
-
-
(324)
Amounts owed by
subsidiaries
2016
£000
6,779
(6,779)
3,900
3,900
2015
£000
6,779
(6,779)
3,900
3,900
In addition, Mrs K Kirby (Lathbury) received £66,185 during the prior 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 £35,000 in the year (2015: £25,000).
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
2016
£000
118,069
10,921
-
5,939
16,860
93
(5)
16,948
(3,452)
13,496
42.1p
42.1p
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
FINANCIAL CALENDAR
Annual general meeting
Announcement of half year results
Financial year end
Announcement of final results
14 September 2016
January 2017
28 May 2017
July 2017
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 14 September 2016 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 29 May 2016 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 re-elect K D Rountree 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-elect E O’Donnell as a director.
Resolution 7
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 8
To authorise the directors to fix the auditors remuneration.
Resolution 9
To approve the remuneration report (excluding the directors’ remuneration policy set out on pages 22 to 25) for the year ended 29 May
2016.
Resolution 10
To approve the directors’ remuneration policy set out on pages 22 to 25, 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 resolution 11 will be proposed as an ordinary resolution and
resolutions 12 and 13 will be proposed as special resolutions.
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 £529,991 provided that this authority shall, unless renewed, varied or revoked by the Company, expire on 13 December
2017 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.
60 Games Workshop Group PLC
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 £80,301.
The power granted by this resolution will expire on 13 December 2017 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 13
December 2017 whichever is the earlier;
the maximum aggregate number of ordinary shares that may be purchased is 3,212,070;
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
25 July 2016
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 6.30 pm on 12 September 2016 or, if this meeting is adjourned, at
2.
6.30pm 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 25 July 2016 (being the last practical date prior to the publication of this notice), the Company's issued share capital comprised 32,120,708
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 25 July 2016 is 32,120,708. 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.
63 Games Workshop Group PLC