GAMES WORKSHOP GROUP PLC
Annual report 2017
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
2017
£000
158,114
143,375
30,832
7,491
38,323
38,403
49,370
2016
£000
118,069
118,069
10,921
5,939
16,860
16,948
26,782
95.1p
74p
42.1p
40p
2
4
14
19
23
31
32
33
38
38
39
40
41
42
63
63
64
*Constant currency revenue is calculated by comparing results in the underlying currencies for 2017 and 2016, both converted at the 2016 average
exchange rates as set out on page 12.
**See page 14 of the directors’ report.
1 Games Workshop Group PLC
CHAIRMAN’S PREAMBLE
Most companies don’t live for long. Leaving aside banks and finance houses that can continue doing pretty much the same thing year upon
year there are only a handful of companies that were in the Fortune 500 in 1900 still going today. Looking at the sector weightings in the
US for 1900 62.8% of value was generated by Railroads; in 2000 it was 0.2%. Other big players in 1900 were mining and iron, coal and steel.
It is not easy to survive when your industry is collapsing around you. In 2000 the big sectors were IT, telecommunications and
pharmaceuticals, non-existent (nearly) in 1900. It is no surprise that today’s giants come from those industries.
If companies don’t live for long, they don’t grow for long either. The classic model is a start-up followed by rapid growth, then slower
consolidating growth then a tail of gradual decline. Some flare and vanish like magnesium, others hang on in there grimly grinding out the
years slowly rusting away like iron.
Investors have the job of buying shares just after the start-up, enjoying the rapid growth period and getting out before the decline. They
like growth. Of course they do. How else can they guarantee to make their customers money? Their job is essentially about timing,
although the time varies wildly from investor to investor. Some like to buy now and sell in a second when the share price has twitched.
Some like to buy now and hold for years to give the shares chance to deliver their full value. I have often argued in the past that the first
group are gamblers and not real investors, but both groups have the same need: growth.
This puts pressure on management. Grow dammit! Easier said than done. The demand for growth can lead to management making truly
lamentable decisions for the long term health of their business in order to deliver now, this year, this quarter. It is no wonder that many
businesses do not live long. Not only are they fighting in an uncertain world, they are having to force things at every turn to serve the god
of growth. This same thirst for growth has also driven the LTIP craze whereby institutions think they have ticked the box labelled ‘long-term
value delivery’ by allowing management to make up complex ‘long-term’ schemes that replace the short-term schemes that used to
reward them so well and so much at the expense of future years. The LTIPs reward management even better, at an even more ruinous
expense to the company. Of course they do; designed by managers for managers and cheered on by City institutions. So now maybe they
aren’t such a good idea after all. It would help if we could all agree that ‘long-term’ means 25 years, not three. (See below).
Investors also like dividends. At the start of a company’s life there is an understood need for re-investment so dividends will be small or
non-existent. As time goes on and the early growth rates slow, the expectation of dividends rises. An expectation of regular and ever
growing payouts. A progressive dividend policy.
This puts pressure on management. Yield dammit! We don’t care if the business isn’t generating truly surplus cash, go out and borrow it so
you can fulfil your commitments. Not only do businesses struggle to grow forever they are expected to do so under the burden of ever
increasing debt.
Yes, I know, too gloomy and fatalistic. And yet these pressures are ever present in the lives of those of us who run public companies. Some
resist and try to do what their companies need, and some give in and pursue unsustainable growth and borrow to pay uncovered
dividends.
This has been our life here at Games Workshop these twenty-odd years. Sometimes growing, sometimes not. One time having a
progressive dividend policy and, more recently, not.
Listening to the comments from investors both favourable (rarely) and critical (often) on how to keep growing and keep paying, it became
clear that for a business to survive it needs to make its business just that: survival.
I realised many years ago that eternal growth, though sorely needed by some investors, was not sustainable. To begin with it was easy to
see that compound growth was literally impossible in the long term, but then it became clear that promising growth at all was prejudicial
to our ability to make good decisions that would keep the company alive and healthy. Yes we like growth. Yes we will try to get it. But, no,
we will not make promises. Sometimes the head winds are too strong. Sometimes the need for re-structuring takes precedence. We will
not do daft things to deliver artificial growth.
When survival becomes the mantra then the company needs to be built so it can live in the lean times as well as the fat. Many of the things
we have done were done to ensure survival. We have investors and their needs are important, but we serve those needs by being honest
with them and letting them know that we are aiming to survive and there will be good times when we grow and pay out dividends and
there will be times when we don’t. We also have staff. They like having jobs. There are seventeen hundred (or so) people all over the world
whose livelihood depends on the company they work for surviving so it can carry on paying the money they earn. We also have customers,
and they want us to survive so their hobby can be maintained and the fun can continue.
In the good years of course our stores can have several staff, but in the bad ones too many staff spells disaster. Losses. Death. One man
stores are not a moral crusade, not a gouging exercise in profiteering, but a survival technique.
Many of you reading this have understood all along what we were doing and why we needed to do it. This year you get the rewards for
your patience. Kevin and all the staff have delivered growth. Not just currency-based growth but real growth generated by great models,
good supporting products, joined-up promotions, intelligent social media work, co-ordinated production schedules and just-in-time
shipping around the world. This year the rewards, and, we hope, next year and many more after that.
2 Games Workshop Group PLC
At heart Games Workshop is a simple business. We make and sell toy soldiers. We do nearly all of it ourselves (because we haven’t found
people who can do any of it better than us; maybe one day we will, we keep on looking) and that makes it fiendishly complicated. Anyone
can make a great miniature. No-one else can make 30 million of them a year and get them, on time, to our stores and trade partners all
over the world and from there into the loving hands of our customers.
§
This is my last preamble. I will not be seeking re-election at the AGM in September. Kevin Rountree has my full confidence and I could not
be leaving the business in better hands. He has the same desire to see Games Workshop flourish as I do and the same determination to do
it our way, the only way that works over the long term. He is better than me at detail, and he has a lot more energy. You can see that in
this year’s numbers. He has laboured at getting all the little things right and we are all benefitting. Little things that have to be got right
every year.
There are many wonderful opportunities ahead for the Company and the Hobby. We have barely begun our ‘Total Global Domination’ (a
mantra from years ago) – despite being at it for over 25 years – and the business is full of ideas about how to do better, everywhere.
Tom Kirby
Non-executive chairman
24 July 2017
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, Northern Europe and Asia.
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 75% of our sales coming from outside the UK.
Design
Employing 187 people, the design studio in Nottingham creates all the IP and the miniatures, artwork, games and publications that we sell.
In 2016/17 we invested £8.0 million in the studio (including software costs) with a further £2.3 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 2017.
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 462 Games Workshop stores in 23 countries. Our stores contributed 41% of the year's sales. We have 360
one man stores, small sites, each one staffed by only one store manager. We also have 102 multi-man stores, which are constantly
reviewed to ensure they remain profitable. If not, they will be closed and probably 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, Shanghai, Singapore, Hong Kong
and Malaysia. In 2016/17 we had 3,900 independent retailers (2016: 3,800) in 62 countries. We strive to deliver excellent service, operating
in 20 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 2016/17. 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 five parts: sales, operations, merchandising and marketing, systems and IP exploitation.
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. A global merchandising and marketing manager supports our sales channels with appropriate
internal and external communication.
My operations and support structure includes a finance director for Games Workshop who is responsible for accounts, compliance,
licensing and legal duties. We have a product and supply manager who is responsible for our factory, logistics and design studios (Citadel,
Forge World and Black Library). He also manages our three main distribution hubs in Nottingham, Memphis and Sydney. A personnel
manager and our Academy personal development and skills training ensure we take our people recruitment and development seriously.
During the year I recruited a Global IT manager. She will help us invest in our core systems as well as consider how we can leverage
technology to help us deliver our long term goals.
IP exploitation. I have a small team of advisors that are helping me ensure we have an exciting five year plan to maximise the income we
earn from external global partners who can deliver incremental value to Games Workshop without causing any harm to the core business.
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 page 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 7.
MAT core business profit
Measures gross profit less operating expenses on a 12 month rolling basis, before royalty income: see page 10.
Number of own stores by territory
Measures the number of our own stores which is an indicator of our global reach: see page 11.
5 Games Workshop Group PLC
STRATEGIC REPORT continued
Key performance indicators continued
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 on page 5.
Return on capital
The ratio of operating profit before royalty income against capital employed, as a percentage: see pages 9 and 10.
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 to treat all customers fairly and to do our utmost to successfully resolve their
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.
Graphs of shareholder value
Share price
Dividend
e
r
a
h
s
r
e
p
e
c
n
e
p
1200
1000
800
600
400
200
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Shareholder value for this graph is calculated as the price of our shares at year end plus the dividend per share paid in the year.
6 Games Workshop Group PLC
Shareholder value continued
The graph below represents the comparative total shareholder return performance of the Company against that of the index of the FTSE
small cap companies since 1994 when Games Workshop floated on the London Stock Exchange. 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.
3500
3000
2500
2000
1500
1000
500
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Games Workshop
FTSE Small Cap
Review of the year
It has been another exciting year building on the progress we made last year.
I am pleased to report a significant increase in constant currency sales, profit, cash generation and returns to shareholders.
I have been impressed, but not surprised, by the continued support, commitment and contribution from all of our employees around the
world. Thank you.
Our endless energy and focus have delivered profitable sales growth across all of our sales channels. Together, we have focussed on
documenting and executing an exciting global operational plan covering all areas of the business. Driving improvements in product quality,
providing the highest levels of customer service - our new marketing team has added a delightful and fun social media presence.
We finished 2015/16 with some encouraging signs of improving sales trends, and these have continued throughout the year we are
reporting. Our operational plan is designed to give us the best chance to succeed every month so it was particularly rewarding to finish the
year to May 2017 with 11 out of 12 months of Group sales growth. Sales growth for the full year at constant currency by channel finished
retail 21%, trade 22% and mail order 20%.
Gross margin improved in the year (2017: 72.4%; 2016: 68.3%), benefitting from sales volume growth and, as always, it is affected by the
sales mix of new and existing product: (34% of sales from new releases and 66% of sales from existing product). We continue to offer a
broad range of price points and we have maintained our policy of aiming to only increase the prices of our new releases to reflect the
necessary investment in our product quality. The annual impact of this increase on our UK RRP price list is an average increase of 3%. The
step increase in volume across all channels has been a significant challenge for our factory and warehousing teams this year. They have
met this challenge without any fuss and with only the necessary increases in resources. They have a flexible and agile structured resource
plan to meet any future volume changes.
Costs have increased in the year. This has been driven by investment in our store opening programme, which has partially helped us to
deliver organic sales growth by expanding into new geographic locations, and our centrally managed marketing team, which has enabled us
to communicate better with our customers and staff through both online and offline channels.
As a direct result of our significant sales and profit growth, we rewarded all of our staff with a £1,750 discretionary payment in addition to
a £250 profit share payment each (total cost £3.4 million). We also honoured our commitment to pay 20% of any sales increase to our
retail store managers (total cost £1.8 million) who achieved growth whilst maintaining costs broadly in-line with last year — an impressive
achievement, well done to you all!
As a global business with 75% of our sales made overseas, our results this year have also benefitted from favourable currency translations.
7 Games Workshop Group PLC
STRATEGIC REPORT continued
Update on priorities for 2016/17
In the year, we focussed on the following initiatives designed to improve our performance in our existing stores and deliver organic sales
growth through store openings:
Staff recruitment
Our retail stores remain one of the most important factors in our success. The constant challenge is to ensure we have a great manager in
every store. In 2015/16 we invested in our recruitment team. In 2016/17 a project team was set up to deliver an improvement in the tools
they use. The two main areas covered by the project team in 2016/17 were rebranding our global recruitment website and implementing
an applicant tracker system. Both the recruitment website and applicant tracker system will go live in 2017/18.
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
In the last 18 months we have made a step change in how we support all aspects of our Hobby: collect, build, paint and play. This has
helped us recruit new customers, re-recruit lapsed customers and support our existing customers. There's still plenty of room for
improvement so it will be a key area of focus for 2017/18.
The quality of our models has been ever better this year. In the year we released over 400 new high quality models across our core
systems; Warhammer: Age of Sigmar and Warhammer 40,000 and added 17 new paint colours to our range. We also launched in the year
new editions of our White Dwarf magazine and Blood Bowl game, the first of many new products from our Specialist Design studio. Both
have sold well. In March 2017 we strengthened and refocused the Black Library team to ensure we continue to produce bestselling novels
that bring our characters and worlds to life. Finally, our design to manufacture teams have been working collaboratively on the new edition
of Warhammer 40,000: Dark Imperium, released in June 2017. The launch line up is the most extensive we’ve had for any game we’ve ever
released. An exciting start to a new year.
Merchandising and marketing
We are increasingly focussed on engaging with our customers. During the year we invested further in some key tools to allow us to
communicate with more of them more often.
Launched in November 2016, warhammer-community.com serves as a hub for a wealth of Warhammer content and the gateway to the
depth of our IP. The tone is fun, honest, engaging and informative. We've also updated our home pages at games-workshop.com with
more content to help guide new and existing customers through our product ranges, characters and worlds. We’ve added more videos to
Warhammer TV to really showcase the passion and enthusiasm our staff have for their work and our products. The team has also done a
great job creating a personal connection with our customers at third party and live streaming online events.
In response, our customers have been fantastic. This year has seen them loyally support us and help grow the Warhammer hobby around
the world.
Trade
We review our trade terms every year and in May 2017 we updated our terms in North America. The new terms allow our independent
trade accounts (and retailers purchasing from our authorised distributors) to sell Games Workshop products online subject to complying
with our standard terms.
We continued to pilot the following initiatives in the year:
Asia
Our four new country managers in Singapore, Hong Kong, Japan and Malaysia have now been in country for approximately 18 months.
They have all reported, together with our existing business in China, double-digit sales growth. We will continue to invest in Asia and I have
agreed to support our local teams and customers with more localised content and additional product formats in 2017/18.
High footfall locations
We have 102 multi-man format stores and 360 one man stores. In 2015/16 we piloted a few stores in high footfall locations. Our
Tottenham Court Road store in London has completed its first full year and has been a great success achieving the highest number of
transactions and sales value of any of our stores for some time. The other pilots in Sydney and Copenhagen continue to perform well.
While these successes leave us with some format options to deploy when opportunities arise, our standard format will continue to be our
one man store model.
8 Games Workshop Group PLC
Update on priorities for 2016/17 continued
New business opportunities
To continue to broaden our reach without distracting our core channels, we continue to pilot 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 a small range called Build
and Paint, globally, in modelling and toy shops in September 2016. Both of these product ranges are on sale and although not delivering
huge value to the Group have proven that we should continue to support a range of products aimed at new customers. More of this in
2017/18.
Finally, after a thorough review, the non-core activities were amalgamated back into the core business functions. Being separated off was
causing the senior team and me more distractions not less. All of these areas performed well in the year reported.
Licensing
The team has had another solid year thanks to the on-going successes of Total War: Warhammer, Warhammer: End Times - Vermintide,
and Warhammer 40,000: Freeblade.
Reported income is split as follows: 80% PC and console games, 13% mobile and 7% other.
Projects
In the year we had three major projects being implemented:
• Warhammer 40K: Dark Imperium product launch in June 2017.
• European ERP - enterprise resource planning (core back office systems) - replacement. We have added additional resource to this
complex project and from April 2017 moved to a more agile methodology for implementing the solution. The revised plan will ensure
we introduce business benefits as we go along rather than only at the end of the project. Our new Global IT manager will oversee this
change. Project estimated cost of £9 million (2016 estimate: £6 million).
• Mail order warehouse system replacement. At an estimated cost of £1.2 million it is scheduled to go-live in Autumn 2017.
Return on capital*
80
70
60
50
%
40
30
20
10
0
24
11
59
46
46
37
42
40
72
27
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
A key measure of our performance is return on capital. During the year our return on capital increased from 27% to 72%. This was driven
by an increase in operating profit before royalty income, offset slightly by an increase in average capital employed.
*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.
9 Games Workshop Group PLC
STRATEGIC REPORT continued
Sales
Sales by segment
Trade
Retail
Mail order
Total sales
Year to
28 May 2017
Constant
currency
£54.5m
£58.7m
£30.2m
£143.4m
Year to
29 May 2016
Constant
currency
£44.5m
£48.4m
£25.2m
£118.1m
Year to
28 May 2017
Actual
rates
£61.3m
£64.8m
£32.0m
£158.1m
Year to
29 May 2016
Actual
rates
£44.5m
£48.4m
£25.2m
£118.1m
2017
% of total
sales
38%
41%
21%
2016
% of total
sales
38%
41%
21%
Reported sales grew by 34% to £158.1 million for the year. On a constant currency basis, sales were up by 21% from £118.1 million to
£143.4 million.
Operating profit
Operating profit by segment
Trade
Retail
Mail order
Product and supply
Royalties (net of costs)
Other costs
Total operating profit
Year to
28 May 2017
Constant
currency
£15.0m
£0.5m
£17.4m
£13.9m
£6.1m
£(21.6)m
£31.3m
Year to
29 May 2016
Constant
currency
£10.6m
£(3.9)m
£13.7m
£8.0m
£5.3m
£(16.8)m
£16.9m
Year to
28 May 2017
Actual
rates
£18.0m
£0.5m
£18.8m
£16.3m
£6.9m
£(22.2)m
£38.3m
Year to
29 May 2016
Actual
rates
£10.6m
£(3.9)m
£13.7m
£8.0m
£5.3m
£(16.8)m
£16.9m
Core business operating profit (operating profit before royalty income) grew by £19.9 million to £30.8 million (2016: £10.9 million). On a
constant currency basis, core business operating profit increased by £13.7 million to £24.6 million. This was driven by improvements across
all of our three main channels.
Costs have been managed well. They have increased by £13.9 million in the year as a result of investments for the long term; £3.7 million in
our store opening programme and £0.7 million in our new merchandising and marketing team. A further £3.5 million of the cost increase is
due to the adverse impact of currency retranslation of costs for our existing overseas retail stores. We also incurred performance related
costs of £1.8 million in payments to our retail staff for delivering growth, paid £0.4 million in profit share and £3.0 million in a discretionary
payment, paid equally to all staff.
Capital employed
Average capital employed increased by £2.7 million to £42.9 million. The book value of tangible and intangible assets increased by £1.5
million, inventories increased by £1.9 million and trade and other receivables increased by £1.8 million whilst current liabilities increased
by £2.5 million.
Cash generation
During the year, the Group’s core operating activities generated £38.5 million of cash after tax payments (2016: £19.5 million). The Group
also received cash of £8.8 million in respect of royalties in the year (2016: £4.7 million). After purchases of tangible and intangible assets
and product development costs of £12.8 million (2016: £12.7 million), dividends of £23.8 million (2016: £12.8 million), loans to Company
shareholders of £1.9 million (2016: £nil), group profit share and discretionary payments to employees of £3.4 million (2016: £nil) and
foreign exchange gains of £0.6 million (2016 : £0.1 million) there were net funds at the year end of £17.9 million (2016: £11.8 million).
10 Games Workshop Group PLC
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
Total capital additions
2017
£million
1.3
3.3
2.4
0.1
7.1
2016
£million
1.8
2.6
3.5
0.1
8.0
In 2016/17 we invested £1.3 million in shop fits: 31 new stores and 12 refurbishments. We also invested £3.3 million in tooling, milling and
injection moulding machines. The investment in computer software relates mainly to the 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 £23.8 million (2016: £12.8 million) were paid during
the year. As a result of an oversight, 6 pence per share of the dividend paid in June 2017 is treated as an unlawful dividend. This is fully
explained in the notice of meeting for the AGM. Steps being proposed to remedy this oversight are in line with other listed companies that
have encountered similar issues in the past.
Royalty income
Royalty income increased in the year by £1.6 million to £7.5 million. This was due to the strong performances of Total War: Warhammer,
Warhammer: End Times – Vermintide and Warhammer 40,000: Freeblade.
Taxation
The effective tax rate for the year was 20.5% (2016: 20.4%). We continue to expect a rate above that for a business with activities based
solely in the UK, due to higher overseas tax rates.
Sales by channel
41% (2016: 41%) of sales were made through our own stores, 38% (2016: 38%) of sales were to independent retailers and 21% (2016: 21%)
were mail order.
Retail
Store openings and closures during the year
UK
North America
Europe
Australia
Asia
Number of stores
at 29 May 2016
148
100
149
46
8
451
Opened
5
14
2
5
5
31
Closed
(6)
(3)
(6)
(4)
(1)
(20)
Number of stores
at 28 May 2017
147
111
145
47
12
462
Number of one man
stores at 28 May 2017
114
96
100
39
11
360
Number of one man
stores at 29 May 2016
111
86
113
38
7
355
We opened 31 new stores in the year including 14 relocated stores (shown within both the opened and closed store numbers above).
These new stores generated £2.4 million of profitable sales. Our main focus for store openings in the year ahead will be North America and
Germany. We will continue to focus on improving our existing store performance.
Retail sales grew by 34% in the year (21% at constant currency). Our underlying sales performance (excluding new product releases) was
16%, with additional growth from 11 net new stores and our new visitor centre delivering 28% growth.
We continue to fine tune our quarterly skills based training for all of our store managers at our retail workshops.
Trade
Sales increased by 38% during the year (22% at constant currency). We delivered growth in every major country we sell our product in
thanks to the hard work of our telesales teams in Memphis, Nottingham and Sydney. Sales to trade accounts which sell primarily online
continue to perform well.
Mail order
Sales grew by 27% (20% at constant currency). Sales of our Forge World range grew by 23% and our Citadel range by 31%. In the second
half of 2016/17 we refreshed 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.
11 Games Workshop Group PLC
STRATEGIC REPORT continued
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 £83,000 (2016: £90,000).
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
2017
1.15
1.17
2016
1.32
1.35
2017
1.28
1.27
2016
1.46
1.49
The net impact in the year of these exchange rate fluctuations on our operating profit was an increase of £7.0 million (2016: reduction of
£0.6 million).
Gender diversity, greenhouse gases, social, community and human rights, and employees
We report on these topics in the directors’ report on pages 16 and 17.
Priorities for 2017/18
As part of our overall strategy, three key initiatives will be prioritised in 2017/18. These are designed to deliver further sales growth whilst
maintaining our operating profit margin.
Firstly, staff recruitment.
We are updating our recruitment web site, our company recruitment 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 started in 2016/17 and will be
completed in 2017. It will also give us a global dashboard of recruitment metrics to help us develop our global recruitment teams and
processes.
Secondly, we will continue to review our product range and offer.
We have started the year off with a huge event in June 2017 with our launch of Warhammer 40K: Dark Imperium.
We will continue to review our product range and in store merchandising. We have not made as much progress as I would have
liked on range management and in store merchandising (busy year!), so I will be reviewing my structure to ensure we have the right
focus on this important sales opportunity.
We will also continue to invest in Warhammer: Age of Sigmar, Forge World, our specialist games and Black Library with exciting
product launches planned throughout 2017/18.
Thirdly, we will continue to focus on recruiting new customers and retaining our existing customers for longer. The aim is to:
Open more of our own stores, mostly in our one man store format in North America and in the second half of the year in Germany.
My goal is to open 25 stores (net) in 2017/18.
Open more trade accounts. This will be based on our well established terms and conditions, selling independent accounts our best
selling products and, where appropriate, the extended range.
Continue to improve our online marketing and communication with a particular focus on new and potential customers.
12 Games Workshop Group PLC
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 2016/17 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.
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 8.
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 pages 8 and 9.
Distractions - this is anything else that gets in the way of us delivering our goals.
Games Workshop relies upon the continued availability and integrity of its IT systems. Our business critical systems are monitored and
disaster recovery plans are in place and reviewed to ensure they remain up to date. The security of our systems is reviewed with software
updates applied and equipment updated as required.
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 will be on
Games Workshop of the UK Government invoking Article 50 of the Treaty of Lisbon, notifying the European Council of its intention to
withdraw from the European Union.
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, especially in the year when Tom steps down from the board. Thanks Tom.
Summary
We've had another fun and exciting year and made significant progress on our strategic initiatives. You can see from these results that our
business and our Hobby are in good shape.
The board continues to believe that the prospects for the business are good.
Kevin Rountree
CEO
24 July 2017
13 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 28
May 2017.
General information
Games Workshop Group PLC (the ‘Company’) and its subsidiaries (together the ‘Group’ or ‘Games Workshop’) 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 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 21 July 2017 have been disclosed to the Company:
Investec Asset Management Limited
T H F Kirby
Massachusetts Financial Services Company
Schroders plc
Working Capital Management Pte Limited
Artemis Investment Management LLP
Aberforth Partners LLP
Ruffer LLP
FIL Limited
No. of shares
3,087,765
2,134,186
2,044,385
1,677,861
1,630,689
1,620,001
1,569,000
1,555,198
1,516,682
%
9.6
6.6
6.4
5.2
5.1
5.0
4.9
4.8
4.7
The Company has not been notified of any other substantial shareholdings.
Dividends
Dividends of 74 pence per share (2016: 40 pence) were paid during the year (£23.8 million; 2016: £12.8 million). Dividends of 80 pence per
share were declared during the year. As a result of a procedural oversight, 6 pence per share of the dividend paid on 2 June 2017 is being
treated as an unlawful dividend in the annual report. Although the Company always had sufficient reserves to pay this dividend at the time
that it was made, the Companies Act 2006 requires this to be demonstrated by reference to interim accounts filed at Companies House
prior to payment. Those interim accounts, however, were not filed with Companies House until after the relevant dividend had been paid
and after the lapse had been identified. No fines or other penalties have been incurred by the Company. Please see resolution 11 tabled in
the notice of meeting for the annual general meeting (‘AGM’).
A further dividend of 20 pence per share was declared post year end and was paid before the signing of these financial statements.
Directors
The present directors of the Company are listed on page 32. 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 AGM. Those who retire are
the longest in office since their election or last re-election. Under this formula, at this year’s AGM, one director requires re-election. In
addition, as a result of their long service, non-executive directors 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 29. 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 24 July 2017.
14 Games Workshop Group PLC
Information on executive directors
K D Rountree (age 47), 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.
R F Tongue (age 46), 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 67), 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. He will be stepping down from the board with effect from the 2017
AGM. 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 73). 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 63). 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 46). 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 of the Merseyside Special Investment Fund
and chairman of Alliance Fund Managers.
Independent auditors
As at 24 July 2017, so far as each director is aware, there is no relevant audit information of which the auditors are unaware and each
director has taken all steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit
information and to establish that the auditors are aware of that information.
Share capital, share rights and other information
As at 24 July 2017, the Company’s authorised share capital was £2,100,000 divided into 42,000,000 ordinary shares of 5p each nominal
value (‘ordinary shares’). On 24 July 2017 there were 32,138,568 (2016: 32,120,708) 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.
15 Games Workshop Group PLC
DIRECTORS’ REPORT continued
Share capital, share rights and other information continued
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.
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 28 May 2017, the Company had an unexpired authority to repurchase shares up to a
maximum of 3,212,070 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 19 to 22.
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 we have continued to focus on the development of the health, safety and environmental standards across
manufacturing, warehousing, offices and retail to improve consistency across the Group and enhance our safety performance.
Injury reporting
During the year there were two injuries reported under the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013
(‘RIDDOR’) in the UK (2015/16: 10) and no recordable cases reported to the US Occupational Safety and Health Administration (2015/16:
5). This decrease in the number of reports is indicative of the increased awareness of reporting and rectifying hazards and near misses
before they become incidents.
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, warehousing, office and retail sites controlled globally by Games Workshop for the year to 28 May 2017. 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
2016/17
684
4,481
5,165
0.075
0.033
2015/16
580
4,766
5,346
0.077
0.045
Continuing on from our success in reducing the CO2e burden across the Group, plans are in place this year to install a 400kW solar panel
system at the Nottingham site and fit electric vehicle charging points.
16 Games Workshop Group PLC
Waste management
We sent 85% of our waste by weight from our Nottingham site for re-use or recycling (2015/16: 67%), and 15% for heat recovery at the
Nottingham City Council incinerator (2015/16: 33%).
Nottingham workplace parking levy and travel to work
Games Workshop will continue its policy of not recharging employees the Workplace Parking Levy (which increased by 2% in April 2017 to
£387 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, 107 members of staff have enjoyed the benefits
of subsidised travel via the Nottingham tram2work scheme. We are also implementing a lift share scheme in 2017/18.
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’) to strengthen the principle of boardroom diversity.
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 28 May 2017, the workforce is comprised as follows:
The board
Senior management
Total workforce
Male
4
7
1,387
Female
2
1
326
Total
6
8
1,713
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.
Anti-bribery
Bribery and corrupt practices are never tolerated in the pursuit of Games Workshop’s business objectives or goals, or within business
relationships, or the actions of its employees and associated parties. This commitment is driven from the CEO and board throughout the
entire Group and a commitment is expected of all who work with the Group and who act on our behalf or are employed or engaged in any
capacity by us. The Games Workshop Anti-Bribery Policy reflects Games Workshop’s zero tolerance approach to acts of bribery.
Anti-slavery
Modern slavery is a crime and a violation of fundamental human rights. Games Workshop has a zero-tolerance approach to modern slavery
and is committed to acting ethically to implement and enforce effective systems and controls to ensure modern slavery is not taking place
within Games Workshop or its supply chains. This commitment is driven from the CEO and the board throughout the entire Group and a
commitment is expected of all who work for, or who supply into, Games Workshop. The Games Workshop Anti-Slavery Policy reflects
Games Workshop’s zero tolerance approach to modern slavery.
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.
17 Games Workshop Group PLC
DIRECTORS’ REPORT continued
Future developments
The future developments for the Group are discussed in the strategic report on pages 4 to 13.
Financial risks
The financial risks facing the Group are set out in note 21 to these financial statements.
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 material fluctuation of the sterling exchange rate
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 2020.
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
24 July 2017
18 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 23 to 30, 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, management 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 2016/17 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 14.
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 14 to 18, to give a fair, balanced and understandable assessment of the Group’s position and
prospects.
The board
The board comprises the non-executive chairman, the CEO, the group finance director and three further 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. With effect from the 2017 AGM, T H F Kirby
intends to retire from the board and N J Donaldson will take on the role of non-executive chairman.
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 current 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.
19 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 2017/18. 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 AGM.
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 2017 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 2017 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 2017 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 valuation: the committee considered and agreed that the inventory provisions were appropriate given the robust formulaic
process applied and the level of risk.
Capitalisation of product development costs: the committee reviewed the accounting for and disclosure of development costs and the
change in accounting estimate for the amortisation of development costs. The committee concluded that the accounting and
disclosure (including the change in estimate) was appropriate but that management should continue to monitor this closely in the
context of product release cycles and underlying sales trends.
Capitalisation of ERP implementation costs: the committee considered and agreed that the costs capitalised in the year and those
impaired in the year were appropriate.
20 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 £4,000 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 auditors. 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 two meetings in the year, which were attended by all members of the committee. The committee meets
without the executive directors at least annually to appraise the executive directors’ performance.
Appointments to the board
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 year.
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 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.
21 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 23 to 30.
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
24 July 2017
22 Games Workshop Group PLC
REMUNERATION REPORT
Introduction
The remuneration report for the year ended 28 May 2017 has been prepared on behalf of the board by the remuneration committee in
accordance with the requirements of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, as amended, and meets the relevant requirements of the Listing Rules of the Financial Conduct
Authority and the UK Corporate Governance Code.
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 2016 annual general meeting (‘AGM’) and the key factors which were taken into account in setting the policy. The directors’
remuneration policy was approved by shareholders at the 2016 AGM. The policy will 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 2016/17 financial year. The 2016/17 report will be subject to an
advisory vote at the 2017 AGM.
2016/17 – a year in review
2016/17 was an exceptional year for Games Workshop. During this year the Group achieved its highest ever levels of sales and profitability.
This was in part a consequence of operating changes introduced by and overseen by the Company’s executive directors, who were
appointed with effect from 1 January 2015. Games Workshop’s 2016/17 results were also favourably affected by currency movements. In
light of this performance, the committee has supported the executive directors’ proposal to make a discretionary payment to all
employees of £1,750 per employee (in addition to the profit share of £250 per employee) as well as a discretionary bonus of 10% of salary
to those senior managers who have contributed to the outstanding performance. The executive directors did not receive either of these
additional discretionary payments.
2017/18 – the year ahead
As announced to the London Stock Exchange and as described elsewhere in this annual report, T H F Kirby has announced his intention to
retire as non-executive chairman of Games Workshop with effect from the closure of the Company’s 2017 AGM on 13 September 2017.
T H F Kirby will not seek re-election as a director of the Company thereafter.
Following T H F Kirby’s retirement from the Company’s board at the 2017 AGM, it is the board’s intention that I shall be appointed non-
executive chairman of Games Workshop. One of my key responsibilities in this role will be to lead a review of the composition of the board
and to set in motion a process of appointing new non-executive directors of the Company, with the intention of making an appointment in
2017/18.
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 continues to make solid progress, enjoying the continued
support of the Games Workshop workforce.
In the interests of continuing the smooth transfer of power and responsibility to the new executive board team, following the 2017 AGM
T H F Kirby will be appointed a consultant to the Company to provide input on product range, IP exploitation and mentoring as deemed
necessary by K D Rountree. This consultancy arrangement will be remunerated at a rate of up to £240,000 over a 12 month period and will
be reviewed after one year.
As noted in last year’s remuneration report, an external pay benchmarking exercise was carried out in May 2016 to assist the committee in
its review of the base salaries payable to the executive directors. To recognise the progress achieved by the Company in 2016/17 and
reflecting again on the pay benchmarking exercise completed in 2016, the committee has resolved to increase the annual salary of K D
Rountree from £375,000 to £410,000 and the annual salary of R F Tongue from £220,000 to £250,000 with effect from 1 June 2017. It is
proposed that on my appointment as non-executive chairman, the salary for this role will be £120,000 per annum. The committee next
proposes to review the base salaries payable to the executive directors at or about the end of the 2017/18 financial year. In conducting
such reviews, the committee seeks to take into account, among other factors, corporate performance on environmental, social and
governance issues.
On my being appointed non-executive chairman of the Company, E O’Donnell will be appointed chairman of the remuneration and
nomination committee.
C J Myatt will remain senior independent director of the Company and chairman of the audit committee.
23 Games Workshop Group PLC
REMUNERATION REPORT continued
2017/18 – the year ahead continued
As noted previously, 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; the board remains concerned that
such schemes can encourage short-term behaviour which may not be in the long-term interests of the Company and its shareholders.
Nevertheless, and following the changes described above, it is intended that a review of the remuneration of Games Workshop’s executive
directors and other senior managers will be undertaken. Shareholders will be informed of the conclusions and recommendations of this
review in due course.
Looking to the future, the committee will continue to monitor the consistency of the 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
24 July 2017
Policy report
This part of the report sets out the directors’ remuneration policy, which has applied since the AGM held on 14 September 2016 where it
was approved by shareholders. The policy will apply until the AGM in 2019 (unless revised by a vote of shareholders before that time).
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.
24 Games Workshop Group PLC
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.
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
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
year 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.
25 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
500
400
300
200
100
0
Fixed
Variable
401
401
401
Fixed pay
Target
Maximum
500
400
300
200
100
0
Fixed
Variable
232
232
232
Fixed pay
Target
Maximum
Fixed pay
Profit share
Minimum
Fixed elements of salary,
benefits and pension. Salary is at
28 May 2017 and the value of
benefits has been assumed to be
equivalent to that included in
the single figure remuneration
table on page 27.
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
26 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
14 September 2016
14 September 2016
14 September 2016
14 September 2016
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 29 May 2016 and 28 May 2017.
Year ended 28 May 2017
K D Rountree
R F Tongue
T H F Kirby
C J Myatt
N J Donaldson
E O’Donnell
Total
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
Salary/fees
£000
391
223
250
60
52
52
1,028
Salary/fees
£000
363
173
221
60
52
52
921
Profit share
£000
-
-
-
-
-
-
-
Profit share
£000
-
-
-
-
-
-
-
Pension related
benefits
£000
10
9
-
-
-
-
19
Pension related
benefits
£000
39
20
-
-
-
-
59
Total
£000
401
232
250
60
52
52
1,047
Total
£000
402
193
221
60
52
52
980
27 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.
Profit share – the amount of profit share earned in the year.
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.
T H F Kirby provided consultancy at a cost of £35,000 in 2015/16 and this consultancy agreement was terminated in 2015/16.
During 2016/17 and 2015/16 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
Year
2017
2016
2015
2015
2014
2013
2013
2012
2011
2010
CEO
K D Rountree
K D Rountree
K D Rountree
T H F Kirby*
T H F Kirby
T H F Kirby
M N Wells**
M N Wells
M N Wells
M N Wells
Total remuneration
£000
401
402
168
291
511
132
774
319
309
282
% of maximum profit share paid
100
-
-
-
-
54
-
48
-
100
*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.
**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.
Percentage change in CEO’s remuneration
The table below shows how the percentage change in the CEO’s salary in 2016/17 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
+2%
Salary cost for the wider workforce has been calculated using the average exchange rates for the year ended 29 May 2016 for both years.
Performance related elements of salary costs have also been excluded in both years.
Relative importance of spend on pay
The following table sets out the percentage change in dividends, profit attributable to owners and employee remuneration for the year
ended 28 May 2017, compared to the year ended 29 May 2016:
Total staff costs
Profit attributable to owners
Dividends declared and paid
2017
£000
60,602
30,547
23,801
2016
£000
49,765
13,496
12,837
% change
+22%
+126%
+85%
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
17,469,323
19,120,284
% of vote
90.8%
99.4%
Votes against
1,764,781
114,913
% of vote
9.2%
0.6%
Votes withheld
1,920
827
% of vote
0.0%
0.0%
28 Games Workshop Group PLC
Implementation statement
A summary of the remuneration arrangements in 2016/17 and how the policy will be applied during 2017/18 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 2016/17 year for its advice was nil (2016: £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
28 May 2017
ordinary shares
of 5p each
As at
29 May 2016
ordinary shares
of 5p each
Beneficial
22,867
4,700
2,108,650
66,500
20,000
3,300
Non-
beneficial
-
3,300
25,536
-
-
1,793
Beneficial
20,473
4,700
2,108,650
66,500
20,000
1,500
Non-
beneficial
-
3,300
25,536
-
-
-
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 29 May 2016
3,924
3,924
Exercised
-
-
Granted
-
-
Number as at
28 May 2017
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.
K D Rountree acquired 592 of the Company’s shares on 2 June 2017 and a further 344 of the Company’s shares on 21 July 2017, both under
the Company’s dividend reinvestment plan. These are the only movements in directors’ interests in shares of the Company between 28
May 2017 and the date of this report.
No other directors have been granted share options in the shares of the Company.
29 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.
300
250
200
150
100
50
0
2012
Games Workshop
FTSE Small Cap
2013
2014
2015
2016
2017
On behalf of the board
N J Donaldson
Chairman
Remuneration and nomination committee
24 July 2017
30 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 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 and Company for that year.
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; and
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 and accounts, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and Company’s performance, business model and strategy.
Each of the directors, whose names and functions are listed on page 32, 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
24 July 2017
31 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
32 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 28 May 2017 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 28 May 2017;
the consolidated income statement and the Group and Company statements of comprehensive income for the year then ended;
the consolidated and Company cash flow statements for the year then ended;
the consolidated 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: £1,900,000 which represents 5% of consolidated profit before tax.
Full scope audits, all conducted by the Group engagement team, were performed on five separate reporting units.
The reporting units audited included the four largest trading units in the Group.
The audited reporting units accounted for 82% of consolidated revenues and 87% of consolidated profit before tax.
Areas of focus Capitalisation of product development costs.
Change in accounting estimate for amortisation of development costs.
Inventory valuation.
Capitalisation of ERP implementation costs.
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.
33 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 5 (audit committee report), page 45 (Key
assumptions and estimates) and page 52 (notes).
The Group incurred £5.7 million of capitalised product
development costs during the year to 28 May 2017, relating to
products the Group develops to sell through its various channels.
The net book value of such capitalised costs as at 28 May 2017
was £7.0 million.
We focussed on this area due to the inherent level of judgement
around whether costs capitalised meet the recognition criteria of
IAS 38 ‘Intangible assets’ (‘IAS 38’), a determination that involves
management estimation in particular as regards to whether they
are specific to projects which are expected to generate future
cash inflows.
Further, there is a risk that capitalised costs will not be supported
by the future cash inflows generated from product sales.
Change in accounting estimate for amortisation of development
costs
Refer to page 5 (audit committee report), page 45 (Key
assumptions and estimates) and page 45 (notes).
The Group changed the basis of the amortisation of development
costs in the year to align the recognised amortisation charge with
the sales profile of the related products.
The impact of the change in accounting estimate is to reduce the
amortisation expense for the year to 28 May 2017 by £2.2m.
We focussed on this area due to the change described above and
due to the inherent level of judgement around the useful
economic lives of capitalised development costs, a determination
that involves management estimation.
Inventory valuation
Refer to page 6 (audit committee report), page 45 (Key
assumptions and estimates) and page 55 (notes).
The Group held inventory of £12.4 million as at 28 May 2017. 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 £0.9m
of inventory per annum.
In order to assess the level of provision required against
inventory, the directors assess forecast sales levels by product
and in certain situations this calculation is subject to manual
override to reflect the specific circumstances of certain inventory
lines.
We focussed 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’
noting no exceptions. 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 FY17 sales
to forecasts made in previous years and evaluated the historical
accuracy of the directors’ estimates. We also compared performance
against forecasts of sales made following the year end. Based on this
assessment, we found the directors’ forecasts to be consistent with the
actual historical outturn of sales and the levels of sales made post-year
end.
We applied sensitivity analysis to the forecasts to understand the
shortfall in revenues that would be required to cause a material
impairment in the carrying value of capitalised costs. We considered
the shortfall required to cause a material impairment unlikely given the
historical accuracy of the directors’ forecasting.
We understood management’s rationale supporting the change in
estimate. We were satisfied that the rationale was reasonable given
the historical sales profiles relating to similar products.
We obtained and inspected historical sales data for similar products
and compared the profile of sales over time following launch to
management’s revised useful economic lives and profile of
amortisation charge over time. We noted no material differences
between useful lives, amortisation rate and the sales profile and were
therefore satisfied that the estimates adopted were appropriate.
We tested the mathematical application of the new policy to the
development costs capitalised and that the policy was applied
consistently. No material errors were noted.
We reviewed the disclosures in the financial statements in respect of
the change in estimate. No material errors were noted.
We tested that the Group provisioning policy is in accordance with
IFRSs as adopted by the EU and has been consistently applied. We
understood and assessed manual overrides to the provision calculation
to determine whether these adjustments were appropriate. No
inappropriate adjustments were identified.
We obtained an understanding of management’s process for preparing
future 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 historical sales forecasts
compared to actual out-turn. 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, post year-end sales 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.
34 Games Workshop Group PLC
Area of focus
How our audit addressed the area of focus
Capitalisation of ERP implementation costs
Refer to page 7 (audit committee report), page 45 (key
assumptions and estimates) and page 52 (notes).
The Group are implementing a new ERP system, this is a complex
project and the Group have revised the plan for implementation
during the year.
The total costs capitalised in the year ended 28 May 2017 were
£1.2m and £0.8m of previously capitalised costs were impaired.
We focussed on this area due to the inherent level of judgement
around the capitalisation of costs which may not meet the IFRS
capitalisation criteria.
We understood the nature of costs capitalised in the year. We assessed
whether the costs capitalised relating to the implementation of the
new system met the criteria set within IFRS.
We tested a sample of items capitalised to source documentation,
including invoices and timesheets. No material errors were noted.
We tested a sample of cost items expensed in the year to source
documentation, including invoices and timesheets and understood
management’s rationale as to why these items had been expensed.
We were satisfied that management’s assessments were reasonable
and no material errors were noted.
We reviewed the total amount of ERP costs capitalised against the
project budget. We were satisfied costs capitalised represented actual
costs incurred and any costs not directly associated with the
implementation of the final design of the system have been
appropriately expensed or impaired.
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 4 in the notes to the financial statements. The group financial statements
are a consolidation of a number of reporting units, comprising the Group’s sales, manufacturing and distribution businesses and centralised
functions, and a number of non-trading Group entities.
Accordingly, of the Group’s reporting units, we identified five (being Head Office and four trading entities) that, in our view, required an
audit of their complete financial information, either due to their size or their risk characteristics. These entities accounted for 82% of
consolidated revenues and 87% of consolidated profit before tax. The audit of these five reporting 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.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall group materiality
£1,900,000 (2016: £847,000).
How we determined it
5% of profit before tax
Rationale for benchmark applied We consider this to be the key financial benchmark of the Group.
We agreed with the audit committee that we would report to them misstatements identified during our audit above £90,000 (2016:
£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 18, 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 to 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 and compliance with applicable requirements
Companies Act 2006 reporting
In our opinion, based on the work undertaken in the course of the audit
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 strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
35 Games Workshop Group PLC
INDEPENDENT AUDITORS’ REPORT continued
In addition, in light of the knowledge and understanding of the Group, the Company and their environment obtained in the course of the
audit, we are required to report if we have identified any material misstatements in the strategic report and the directors’ report. We have
nothing to report in this respect.
In our opinion, based on the work undertaken in the course of the audit:
the information given in the corporate governance statement set out on pages 19 to 22 with respect to internal control and risk
management systems and about share capital structures is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements; and
the information given in the corporate governance statement set out on pages 19 to 22 with respect to the Company’s corporate
governance code and practices and about its administrative, management and supervisory bodies complies with rules 7.2.2, 7.2.3
and 7.2.7 of the Disclosure Guidance and Transparency Rules sourcebook of the Financial Conduct Authority.
In addition, in light of the knowledge and understanding of the Group, the Company and their environment obtained in the course of the
audit, we are required to report if we have identified any material misstatements in the information referred to above in the corporate
governance statement. We have nothing to report in this respect.
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 31, 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 pages 20 and 21, 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 13 of the annual report, in accordance with provision 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 18 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 a
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 qualifications 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.
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment of the principal
risks facing the Group and the directors’ statement in relation to the longer term viability 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 directors’ 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.
36 Games Workshop Group PLC
Directors’ remuneration
Directors’ remuneration report - Companies Act 2006 opinion
In our opinion, the part of the directors’ 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 statement 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 31, 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. With respect to the strategic report, directors’ report and corporate
governance statement, we consider whether those reports include the disclosures required by applicable legal requirements.
Andrew Lyon (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
East Midlands
24 July 2017
37 Games Workshop Group PLC
CONSOLIDATED INCOME STATEMENT
Revenue
Cost of sales pre-change in accounting estimates*
Cost of sales impact of change in accounting estimates*
Cost of sales
Gross profit
Operating expenses
Other operating income - royalties receivable
Operating profit pre-change in accounting estimates*
Operating profit impact of change in accounting estimates*
Operating profit
Finance income
Finance costs
Profit before taxation
Income tax expense
Profit attributable to owners of the parent
Notes
4
4,5
4
7
8
9
10
27
Year ended
Year ended
28 May 2017
£000
158,114
29 May 2016
£000
118,069
(45,224)
1,533
(37,438)
-
36,790
1,533
16,860
-
(43,691)
114,423
(83,591)
7,491
38,323
87
(7)
38,403
(7,856)
30,547
(37,438)
80,631
(69,710)
5,939
16,860
93
(5)
16,948
(3,452)
13,496
Earnings per share for profit attributable to the owners of the parent during the year (expressed in pence per share):
Basic earnings per ordinary share
Diluted earnings per ordinary share
Basic earnings per ordinary share - pre-change in accounting estimates*
Diluted earnings per ordinary share - pre-change in accounting estimates*
Notes
11
11
11
11
Year ended
Year ended
28 May 2017
95.1p
94.5p
91.2p
90.7p
29 May 2016
42.1p
42.0p
42.1p
42.0p
STATEMENTS OF COMPREHENSIVE INCOME
Profit attributable to owners of the parent
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the year
Total comprehensive income attributable to owners of the parent
Notes
26
Group
Year ended
28 May 2017
£000
30,547
Year ended
29 May 2016
£000
13,496
Company
Year ended
28 May 2017
£000
26,594
Year ended
29 May 2016
£000
13,363
2,663
2,663
33,210
485
485
13,981
-
-
26,594
-
-
13,363
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 42 to 62 are an integral part of these financial statements.
*With effect from 30 May 2016 the Group implemented a change in accounting estimates for the amortisation of development costs intangible assets and for
the depreciation of moulding tools. The change in accounting estimates is described in note 3 to these financial statements.
38 Games Workshop Group PLC
BALANCE SHEETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investments in subsidiaries
Deferred tax assets
Trade and other receivables
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 for other liabilities and charges
Net current assets
Non-current liabilities
Other non-current liabilities
Provisions for other liabilities and charges
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Retained earnings
Total equity
Notes
Group
Company
28 May 2017
£000
29 May 2016
£000
28 May 2017
£000
29 May 2016
£000
13
14
15
16
17
19
18
19
20
22
24
23
24
25
25
26
27
1,433
12,917
22,132
-
5,399
1,081
42,962
12,421
12,976
596
17,910
43,903
86,865
(16,515)
(5,840)
(689)
(23,044)
20,859
(494)
(495)
(989)
62,832
1,607
10,599
4,330
46,296
62,832
1,433
10,501
22,621
-
3,219
929
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
-
-
-
30,584
29
3,957
34,570
-
4,401
-
746
5,147
39,717
(656)
-
-
(656)
4,491
-
-
-
39,061
1,607
10,599
101
26,754
39,061
-
-
-
30,584
43
3,900
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
The Company’s profit after taxation for the year ended 28 May 2017 is £26,594,000 (2016: £13,363,000).
The notes on pages 42 to 62 are an integral part of these financial statements.
The financial statements on pages 38 to 62 were approved by the board of directors on 24 July 2017 and were signed on its behalf by:
K D Rountree, Director
R F Tongue, Director
Registered number 2670969
39 Games Workshop Group PLC
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
At 31 May 2015 and 1 June 2015
Profit for the year to 29 May 2016
Exchange differences on translation of foreign operations
Total comprehensive income for the year
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
Called up
share capital
£000
1,603
Share
premium
account
£000
10,218
Other reserves
(note 26)
£000
1,182
-
-
-
-
3
-
-
3
-
-
-
-
301
-
-
301
-
485
485
-
-
-
-
-
Retained
earnings
(note 27)
£000
38,522
13,496
-
13,496
193
-
(3)
(12,837)
(12,647)
Total
equity
£000
51,525
13,496
485
13,981
193
304
(3)
(12,837)
(12,343)
At 29 May 2016 and 30 May 2016
1,606
10,519
1,667
39,371
53,163
Profit for the year to 28 May 2017
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme (note 25)
Deferred tax credit relating to share options
Current tax credit relating to exercised share options
Dividends paid to Company shareholders
Total transactions with owners
At 28 May 2017
-
-
-
-
1
-
-
-
1
1,607
-
-
-
-
80
-
-
-
80
10,599
-
2,663
2,663
-
-
-
-
-
-
4,330
COMPANY STATEMENT OF CHANGES IN TOTAL EQUITY
At 31 May 2015 and 1 June 2015
Profit for the year to 29 May 2016
Total comprehensive income for the year
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme (note 25)
Dividends paid to Company shareholders
Total transactions with owners
Called up
share capital
£000
1,603
-
-
-
3
-
3
Share
premium
account
£000
10,218
Capital
redemption
reserve
£000
101
-
-
-
301
-
301
-
-
-
-
-
-
30,547
-
30,547
160
-
14
5
(23,801)
(23,622)
46,296
Retained
earnings
(note 27)
£000
23,082
13,363
13,363
193
-
(12,837)
(12,644)
30,547
2,663
33,210
160
81
14
5
(23,801)
(23,541)
62,832
Total
equity
£000
35,004
13,363
13,363
193
304
(12,837)
(12,340)
At 29 May 2016 and 30 May 2016
1,606
10,519
101
23,801
36,027
Profit for the year to 28 May 2017
Total comprehensive income for the year
Transactions with owners:
Share-based payments
Shares issued under employee sharesave scheme (note 25)
Dividends paid to Company shareholders
Total transactions with owners
At 28 May 2017
-
-
-
1
-
1
1,607
-
-
-
80
-
80
10,599
-
-
-
-
-
-
101
26,594
26,594
26,594
26,594
160
-
(23,801)
(23,641)
26,754
160
81
(23,801)
(23,560)
39,061
The notes on pages 42 to 62 are an integral part of these financial statements.
40 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 generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchases of other intangible assets
Expenditure on product development
Interest received
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Interest paid
Loans to Company shareholders
Dividends paid to Company shareholders
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Effects of foreign exchange rates on cash and cash equivalents
Closing cash and cash equivalents
Group
Company
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
49,370
(5,212)
(270)
43,888
(5,409)
(1,749)
(5,686)
87
(12,757)
81
(4)
(1,901)
(23,801)
(25,625)
5,506
11,775
629
17,910
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
25,511
-
-
25,511
13,234
-
-
13,234
-
-
-
8
8
81
-
(1,901)
(23,801)
(25,621)
(102)
843
5
746
-
-
-
70
70
304
-
-
(12,837)
(12,533)
771
71
1
843
Notes
28
14
25
12
20
The notes on pages 42 to 62 are an integral part of these financial statements.
41 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 global web stores 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 years
presented, unless otherwise stated. With effect from 30 May 2016 the Group implemented a change in accounting estimates for the amortisation of
development costs intangible assets and the accounting estimate for the depreciation of moulding tools. These are described in note 3 along with the
impact on the results for the year ended 28 May 2017.
Basis of preparation
These financial statements are prepared under the going concern basis and in accordance with International Financial Reporting Standards (IFRSs) and IFRS
Interpretations Committee (IC) 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.
Basis of consolidation
The consolidated financial statements include the Company and its subsidiary undertakings drawn up for the years ended 28 May 2017 and 29 May 2016.
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 28 May 2017
and 29 May 2016, have been used for consolidation purposes. In addition the management accounts of Games Workshop Malaysia Sdn. Bhd. prepared to 29
May 2016 were used for consolidation purposes in the prior year.
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 reducing balance basis
with rates ranging from 50% to 80% 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
42 Games Workshop Group PLC
2. Summary of significant accounting policies continued
Property, plant and equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation and any provision for impairment. The cost of property, plant and
equipment is their purchase cost, together with any incidental costs of acquisition.
Depreciation is calculated 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 – product specific
Moulding tools – non-product specific
Straight line %
of cost
2-4
15-33
20-25
-
25
Reducing balance %
of net book value
-
-
-
50
-
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.
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.
Trade receivables
Trade receivables are recognised initially at fair value, which is typically the original invoice amount, and carried at amortised cost using the effective interest
method. 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 year;
- 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.
43 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
2. Summary of significant accounting policies continued
Other employee benefits continued
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.
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 (2016: 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 year 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 year in which they are declared.
Provisions for other liabilities and charges
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.
44 Games Workshop Group PLC
2. Summary of significant accounting policies continued
Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
revenues, expenses, assets and liabilities, and disclosure of contingencies at the balance sheet date. If in future such estimates and assumptions, which are
based on management’s best judgement at the date of the consolidated financial statements, deviate from actual circumstances, the original estimates and
assumptions will be modified, as appropriate, in the year 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.
New accounting standards
There are no new accounting standards or interpretations effective in the current year 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. In
addition, amounts receivable from customers in respect of delivery charges will be recognised as revenue. Currently these are offset against the carriage
cost to the Group within cost of sales.
- IFRS 9 ‘Financial instruments’ (effective for the year ending 2 June 2019). Under this new standard, provisions for impairment of trade receivables will be
recognised at an amount based on expected credit losses and will be calculated from the initial recognition of the asset. Currently provisions for
impairment of trade receivables are not recognised until there is an indication of impairment. The Group is assessing the impact of the new standard.
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. Change in accounting estimates
With effect from 30 May 2016 the Group implemented a change in accounting estimates for the amortisation of development costs intangible assets and the
depreciation of moulding tools. Previously product development costs recognised as intangible assets were amortised on a straight line basis over periods
ranging between 1 and 48 months. These development costs intangible assets are now amortised on a reducing balance basis with rates ranging from 50% to
80%. Previously moulding tools were depreciated on a straight line basis over a period of 48 months. Moulding tools relating to specific products are now
amortised on a reducing balance basis at 50%.
The changes have been made in order to better match the expenditure incurred to the expected revenue generated from the subsequent product release. In
accordance with IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ the changes are recognised prospectively and hence there is no
impact on the results or financial position previously reported for the year ended 29 May 2016.
The impact of the change on the results for the year ended 28 May 2017 is shown in the table below:
Cost of sales
Gross profit
Operating profit
Income tax expense
Profit attributable to owners of the parent
Other intangible assets
Property, plant and equipment
Deferred tax assets
Current tax liabilities
Net assets
Pre-change in
accounting
estimates
£000
(45,224)
112,890
36,790
(7,565)
29,305
Impact of change in
accounting
estimates
£000
1,533
1,533
1,533
(291)
1,242
10,720
22,796
5,273
(5,423)
61,590
2,197
(664)
126
(417)
1,242
Total
Year ended
28 May 2017
£000
(43,691)
114,423
38,323
(7,856)
30,547
12,917
22,132
5,399
(5,840)
62,832
Basic earnings per share (expressed in pence per share)
Diluted earnings per share (expressed in pence per share)
91.2p
90.7p
3.9p
3.8p
95.1p
94.5p
The impact of the change in accounting estimates in future years will depend on the release mix and nature of products being developed in those years. A
benefit relating to the changes in accounting estimates is expected until the year ending 31 May 2020, when the change will no longer materially impact the
financial statements.
45 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
4. Segment information
As Games Workshop is a vertically integrated business, management assesses the performance of sales channels and manufacturing and distribution
channels separately. At 28 May 2017, 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 stores. 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, agents and distributors. It 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, health and safety, 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’, charges in respect of the Group’s profit share scheme and the discretionary payment to employees for the current year. 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 28 May 2017 is as follows:
Trade
Retail
Mail order
Total external revenue
Year ended
28 May 2017
£000
61,254
64,848
32,012
158,114
Year ended
29 May 2016
£000
44,522
48,414
25,133
118,069
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
Rest of world
Black Library
Total Trade
Retail
UK
Continental Europe
North America
Australia and New Zealand
Asia
Total Retail
Mail order
Total external revenue
Year ended
28 May 2017
£000
Restated*
Year ended
29 May 2016
£000
25,442
27,207
2,472
2,257
1,580
2,296
61,254
22,474
16,859
16,759
7,471
1,285
64,848
18,921
19,523
1,816
1,417
1,069
1,776
44,522
19,364
12,916
10,584
5,133
417
48,414
32,012
158,114
25,133
118,069
*Segment revenue of £8,675,000 for the year ended 29 May 2016 previously reported as non-core trade has been reclassified within the trade segment as
UK and Continental Europe (£3,417,000), North America (£1,579,000), Australia and New Zealand (£158,000), Asia (£676,000), Rest of world (£1,069,000)
and Black Library (£1,776,000) to reflect the management structure in place at 28 May 2017.
Segment revenue of £3,495,000 for the year ended 29 May 2016 previously reported as non-core retail has been reclassified within the retail segment as UK
(£3,290,000), Continental Europe (£38,000) and North America (£167,000) to reflect the management structure in place at 28 May 2017.
In addition mail order segment revenue of £4,115,000 for the year ended 29 May 2016 previously reported as non-core mail order and £21,018,000
previously reported as Citadel and Forge World are now reported together as Mail order which reflects the management structure in place at 28 May 2017.
46 Games Workshop Group PLC
4. Segment information continued
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
Profit share scheme charge
Discretionary payment to employees
Total group operating expenses
Year ended
28 May 2017
£000
(10,855)
(42,849)
(5,290)
(2,618)
(6,215)
(11,824)
(371)
(80,022)
(160)
(444)
(2,965)
(83,591)
Restated*
Year ended
29 May 2016
£000
(8,899)
(35,930)
(5,002)
(2,380)
(5,969)
(10,907)
(430)
(69,517)
(193)
-
-
(69,710)
*Operating expenses of £387,000 for the year ended 29 May 2016 relating to certain marketing costs have been reclassified from product and supply to
central costs which reflects the current management structure in place for the year ended 28 May 2017.
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
Profit share scheme charge
Discretionary payment to employees
Total group operating profit
Finance income
Finance costs
Profit before taxation
Year ended*
28 May 2017
£000
17,956
461
18,788
16,286
(6,724)
(11,824)
6,949
41,892
(160)
(444)
(2,965)
38,323
87
(7)
38,403
Restated**
Year ended
29 May 2016
£000
10,625
(3,927)
13,747
8,019
(5,833)
(10,907)
5,329
17,053
(193)
-
-
16,860
93
(5)
16,948
*The implementation of the change in accounting estimates for the amortisation of development costs intangible assets and the depreciation of moulding
tools, as described in note 3, has resulted in an increase in operating profit of £1,533,000 which is shown within the product and supply segment above.
There is no impact on the results for the year ended 29 May 2016.
**Segment operating profit for the year ended 29 May 2016 has been restated to reclassify a stock valuation gain of £517,000 from the retail segment to the
product and supply segment. In addition a segment loss of £409,000 for the year ended 29 May 2016 relating to certain marketing costs has been
reclassified from product and supply to central costs. These restatements reflect the current management structure in place for the year ended 28 May
2017.
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
Royalties
Total group charges for impairment, depreciation and amortisation
Year ended
28 May 2017
£000
(8)
(1,574)
(1,037)
(6,754)
(342)
(1,285)
(2)
(11,002)
Restated*
Year ended
29 May 2016
£000
(3)
(1,439)
(983)
(7,104)
(338)
(551)
-
(10,418)
*Depreciation of £43,000 for the year ended 29 May 2016 relating to part of the marketing costs has been reclassified from the product and supply segment
to the central costs segment. This reflects the current management structure in place for the year ended 28 May 2017. In addition depreciation charges of
£286,000 shown in the service centre costs segment in the prior year have been reclassified to central costs in order to correct an error in the presentation
of this in the prior year.
47 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
4. Segment information continued
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
Net charge to inventory
provisions
Year ended
29 May 2016
£000
-
-
-
(1,805)
-
(1,805)
Year ended
28 May 2017
£000
-
-
-
(1,376)
-
(1,376)
Redundancy costs and
compensation for loss of office
Year ended
29 May 2016
£000
(25)
(150)
(17)
(51)
(293)
(536)
Year ended
28 May 2017
£000
(41)
(361)
(60)
-
(547)
(1,009)
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
28 May 2017
£000
40,190
42,672
56,954
16,633
1,665
158,114
Year ended
29 May 2016
£000
33,021
32,391
40,788
10,981
888
118,069
2017
£000
33,880
3,683
37,563
2016
£000
32,458
3,026
35,484
Tangible and intangible asset additions included within the UK were £11,467,000 (2016: £11,307,000) and all other countries were £1,281,000 (2016:
£1,248,000).
5. Operating expenses
Selling costs
Administrative expenses
Year ended
28 May 2017
£000
50,384
33,207
83,591
Year ended
29 May 2016
£000
41,991
27,719
69,710
48 Games Workshop Group PLC
6. Directors and employees
Total directors’ and employees’ costs:
Wages and salaries
Social security
Other pension costs
Share-based payment
Group
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
Company
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
52,528
5,813
2,101
160
60,602
42,931
4,711
1,930
193
49,765
1,157
143
27
2
1,329
1,420
178
75
3
1,676
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.
Total directors’ and employees’ costs above include the impact of foreign currency movements in the year. Total directors’ and employees’ costs for the
Group for the year ended 28 May 2017 calculated using the average exchange rates for the year ended 29 May 2016 are £57,664,000. This includes
performance related elements of salary costs, payments under the Group’s profit share scheme and the discretionary payment to employees of £4,876,000
(2016: £nil).
Highest paid director
The above includes salary costs of £391,000 (2016: £363,000) and pension costs of £10,000 (2016: £39,000) in respect of the highest paid director.
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 17.
Short-term employee benefits
Post-employment benefits
Share-based payment
Year ended
28 May 2017
£000
1,254
29
5
1,288
Year ended
29 May 2016
£000
1,110
84
5
1,199
Further information relating to directors’ emoluments, shareholdings and share options is disclosed in the remuneration report on pages 27 to 29.
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
Year ended
28 May 2017
Number
Restated*
Year ended
29 May 2016
Number
232
171
831
110
369
1,713
209
160
826
86
364
1,645
*Employee numbers for the year ended 29 May 2016 have been restated to reduce the number of part time employees within selling activities by 100.
This better reflects the nature of these employees being cover staff within the retail chain.
The monthly average number of employees for the Company was 7 (2016: 9).
7. Finance income
Interest income:
- On cash and cash equivalents
-
8. Finance costs
Interest expense:
- Unwinding of discount on provisions
- Other interest payable
-
-
49 Games Workshop Group PLC
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
87
87
93
93
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
3
4
7
2
3
5
-
-
-
-
-
-
-
-
-
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS continued
9. Profit before taxation
Profit before taxation is stated after charging/(crediting):
Depreciation:
- Owned property, plant and equipment
(Reversal) of/charge for impairment of property, plant and equipment
Amortisation:
- Owned computer software
- Development costs
Impairment of computer software
Non-capitalised development costs
Staff costs (excluding capitalised salary costs shown in note 14 and non-capitalised development staff costs)
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 (credit)/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 year
Under provision in respect of prior years
Current overseas taxation:
Overseas corporation tax on profits for the year
Over provision in respect of prior years
Total current taxation
Deferred taxation:
Origination and reversal of timing differences
Over provision in respect of prior years
Tax expense recognised in the income statement
Current tax (credit)/charge relating to sharesave scheme
Deferred tax credit relating to sharesave scheme
(Credit)/charge taken directly to equity
50 Games Workshop Group PLC
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
6,107
(55)
1,217
2,900
833
4,299
53,659
212
8,857
611
209
137
25,034
1,376
111
14
1,009
(185)
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
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
54
122
4
180
53
120
9
182
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
8,217
887
9,104
587
(77)
9,614
(477)
(1,281)
7,856
(5)
(14)
(19)
2,588
40
2,628
349
(32)
2,945
660
(153)
3,452
3
-
3
10. Income tax expense continued
The tax on the Group’s profit before taxation differs in both years presented 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 19.83% (2016: 20%)
Effects of:
Items not deductible/(assessable) for tax purposes
Movement in deferred tax not recognised
Higher tax rates on overseas earnings
Adjustments to tax charge in respect of prior years
Total tax charge for the year
Year ended
28 May 2017
£000
38,403
7,615
Year ended
29 May 2016
£000
16,948
3,390
210
-
502
(471)
7,856
(248)
(2)
457
(145)
3,452
Reductions to the UK corporation tax rate were included in the Finance Act (No. 2) 2015 which reduced the main rate to 19% from 1 April 2017. A further
reduction in the UK corporation tax rate was included in the Finance Act 2016 to reduce the rate to 17% from 1 April 2020. These changes had been
substantively enacted at the balance sheet date and their impact has therefore been included in these financial statements.
On 29 March 2017, the UK Government invoked Article 50 of the Treaty of Lisbon, notifying the European Council of its intention to withdraw from the
European Union (the ‘EU’). There is an initial two year timeframe for the UK and EU to reach an agreement on the withdrawal, although this timeframe can
be extended. There is significant uncertainty about the withdrawal process; its timeframe; and the outcome of the negotiations. As a result, there is
significant uncertainty as to the period for which the existing EU laws for member states will continue to apply to the UK and which laws will apply to the UK
after an exit. At this stage the level of uncertainty is such that it is impossible to determine if, how and when the UK’s tax status will change. The directors
have assessed and have not identified any significant matters impacting the financial statements.
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 year.
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-change in accounting estimates
Year ended
28 May 2017
30,547
32,126
95.1
Year ended
29 May 2016
13,496
32,093
42.1
Basic earnings per share - pre-change in accounting estimates is calculated by dividing the profit attributable to owners of the parent, before the impact of
the change in accounting estimates, by the weighted average number of ordinary shares in issue during the year.
Profit attributable to owners of the parent pre-change in accounting estimates (£000)
Weighted average number of ordinary shares in issue (thousands)
Basic earnings per share pre-change in accounting estimates (pence per share)
Diluted earnings per share
Year ended
28 May 2017
29,305
32,126
91.2
Year ended
29 May 2016
13,496
32,093
42.1
The calculation of diluted earnings per share has been based on the profit attributable to owners of the parent and the weighted average number of shares
in issue throughout the year, adjusted for the dilutive effect of share options outstanding at the year 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-change in accounting estimates
Year ended
28 May 2017
30,547
32,126
199
32,325
94.5
Year ended
29 May 2016
13,496
32,093
57
32,150
42.0
The calculation of diluted earnings per share pre-change in accounting estimates has been based on the profit attributable to owners of the parent, before
the impact of the change in accounting estimates, and the weighted average number of shares in issue throughout the year, adjusted for the dilutive effect
of share options outstanding at the year end.
Profit attributable to owners of the parent pre-change in accounting estimates (£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-change in accounting estimates (pence per share)
51 Games Workshop Group PLC
Year ended
28 May 2017
29,305
32,126
199
32,325
90.7
Year ended
29 May 2016
13,496
32,093
57
32,150
42.0
NOTES TO THE FINANCIAL STATEMENTS continued
12. Dividends per share
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 prior year. A dividend of 25 pence per share, amounting to a total dividend of £8,031,000, a dividend of 30
pence per share, amounting to a total dividend of £9,638,000 and a further dividend of 19 pence per share, amounting to a total dividend of £6,132,000,
were declared and paid during the current year. Please refer to note 19 for further disclosure regarding the unlawful dividend that relates to part of the
dividend paid on 2 June 2017. A resolution is to be proposed at the AGM in order to remedy this oversight.
13. Goodwill
Group
Cost
At beginning of year
Exchange differences
At end of year
Accumulated amortisation
At beginning of year
Exchange differences
At end of year
Net book value at beginning of year and end of year
The Company had no goodwill at either year end.
Year ended
28 May 2017
£000
Year ended
29 May 2016
£000
2,405
7
2,412
(972)
(7)
(979)
1,433
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 year 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% (2016: 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 1.72% (2016: 2.25%).
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 31 May 2015 and 1 June 2015
Additions
Exchange differences
Disposals
At 29 May 2016 and 30 May 2016
Additions
Exchange differences
Disposals
At 28 May 2017
Accumulated amortisation
At 31 May 2015 and 1 June 2015
Amortisation charge
Exchange differences
Disposals
At 29 May 2016 and 30 May 2016
Amortisation charge
Exchange differences
Impairment
Disposals
At 28 May 2017
Net book amount
At 29 May 2016
At 28 May 2017
52 Games Workshop Group PLC
Computer
software
£000
Development
costs
£000
10,500
2,784
74
(18)
13,340
1,690
359
(28)
15,361
27,738
4,578
-
(2,484)
29,832
5,686
-
(879)
34,639
(5,764)
(1,232)
(73)
16
(7,053)
(1,217)
(355)
(833)
28
(9,430)
(24,212)
(3,853)
-
2,447
(25,618)
(2,900)
-
-
865
(27,653)
6,287
5,931
4,214
6,986
Total
£000
38,238
7,362
74
(2,502)
43,172
7,376
359
(907)
50,000
(29,976)
(5,085)
(73)
2,463
(32,671)
(4,117)
(355)
(833)
893
(37,083)
10,501
12,917
14. Other intangible assets continued
The impact of the change in accounting estimate for the amortisation of development costs intangible assets is an increase in the net book value of
intangible assets of £2,197,000 as at 28 May 2017. There is no impact on the net book value of intangible assets at 29 May 2016.
Amortisation of £2,936,000 (2016: £3,954,000) has been charged in cost of sales and £1,181,000 (2016: £1,131,000) in operating expenses.
The net book amount of internally generated intangible assets is £9,529,000 (2016: £6,557,000) and acquired intangible assets is £3,388,000 (2016:
£3,944,000). The net book amount of internally generated development costs is £6,986,000 (2016: £4,214,000). £5,404,000 (2016: £3,964,000) is capitalised
salary costs.
Salary costs of £4,225,000 (2016: £4,306,000) were capitalised as part of development costs and £348,000 (2016: £548,000) were capitalised as part of
computer software during the year.
An impairment of £833,000 relates to the replacement of the ERP system which has been written down to estimated value in use. This has been charged in
administrative expenses.
Assets in the course of development, and not amortised, amount to £3,424,000 (2016: £2,811,000) with current and prior year amounts both being included
within computer software.
The Company had no other intangible assets at either year end.
15. Property, plant and equipment
Group
Cost
At 31 May 2015 and 1 June 2015
Additions
Exchange differences
Disposals
Reclassification
At 29 May 2016 and 30 May 2016
Additions
Exchange differences
Disposals
At 28 May 2017
Accumulated depreciation
At 31 May 2015 and 1 June 2015
Charge for the year
Exchange differences
Impairment
Disposals
At 29 May 2016 and 30 May 2016
Charge for the year
Exchange differences
Reversal of impairment
Disposals
At 28 May 2017
Net book amount
At 29 May 2016
At 28 May 2017
Fixtures
and
fittings
£000
18,028
1,806
377
(1,522)
173
18,862
1,327
1,466
(281)
21,374
(15,195)
(1,339)
(326)
(28)
1,502
(15,386)
(1,545)
(1,224)
55
234
(17,866)
Moulding
tools
£000
26,500
2,154
-
(662)
-
27,992
2,315
1
(2,413)
27,895
(22,086)
(1,986)
-
-
662
(23,410)
(2,694)
(1)
-
2,395
(23,710)
Total
£000
77,880
5,193
496
(2,905)
-
80,664
5,372
1,971
(2,842)
85,165
(55,161)
(5,305)
(426)
(28)
2,877
(58,043)
(6,107)
(1,669)
55
2,731
(63,033)
Freehold
land and
buildings
£000
Plant and
equipment
and vehicles
£000
16,622
1,204
119
(721)
-
17,224
1,696
504
(148)
19,276
(12,812)
(1,625)
(100)
-
713
(13,824)
(1,494)
(444)
-
102
(15,660)
16,730
29
-
-
(173)
16,586
34
-
-
16,620
(5,068)
(355)
-
-
-
(5,423)
(374)
-
-
-
(5,797)
11,163
10,823
3,400
3,616
3,476
3,508
4,582
4,185
22,621
22,132
The impact of the change in accounting estimate for the depreciation of moulding tools is a decrease in the net book value of property, plant and equipment
of £664,000 as at 28 May 2017. There is no impact on the net book value of property, plant and equipment at 29 May 2016.
Depreciation expense of £3,840,000 (2016: £3,199,000) has been charged in cost of sales, £1,492,000 (2016: £1,307,000) in selling costs and £775,000 (2016:
£799,000) in administrative expenses.
Freehold land amounting to £3,836,000 (2016: £3,836,000) has not been depreciated.
Assets in the course of construction, and not depreciated, amount to £1,088,000 (2016: £1,085,000). £553,000 (2016: £570,000) of these are included in
moulding tools, £385,000 (2016: £373,000) is included in plant and equipment and vehicles, £nil (2016: £26,000) is included in freehold land and buildings,
and £150,000 (2016: £116,000) is included in fixtures and fittings above.
A reversal of impairment of £55,000 (2016: impairment of £28,000) relates to fixtures and fittings within loss making retail stores which have been written
down to estimated value in use. This has been credited or charged in selling costs in both years.
The Company held no property, plant and equipment at either year end.
53 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
16. Investments in subsidiaries
Company
Shares in group undertakings – cost
Beginning of year and end of year
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
2017
£000
2016
£000
30,584
30,584
Name of undertaking
Games Workshop Limited
Games Workshop Retail
Inc.
Games Workshop (Queen
Street) Limited
EURL Games Workshop
Games Workshop SL
Games Workshop Oz Pty
Limited
Games Workshop
Deutschland GmbH
Games Workshop Limited
Games Workshop Italia
SRL
Games Workshop
International Limited
Games Workshop US
Limited
Games Workshop US
(Holdings) Limited
Games Workshop Good
Hobby (Shanghai)
Commercial Co. Ltd
Games Workshop Trustee
Limited
Games Workshop
Stockholm AB
Games Workshop Hong
Kong Limited
Games Workshop Hobby
Pte. Limited
Games Workshop
Malaysia Sdn. Bhd.
Games Workshop
Interactive Limited
Warhammer Online
Limited
Citadel Miniatures Limited
Games Workshop Limited
Registered address of undertaking
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
6211 East Holmes Road, Memphis,
Tennessee, 38141, USA
3251 Yonge Street, Toronto, Ontario,
M4N 2L5, Canada
10, Rue Joseph Serlin, Lyon, 69001, France
208 planta 4 puerta 6, 08011 Barcelona,
España
23 Liverpool Street, Ingleburn,
New South Wales 2565, Australia
Am Wehrhahn 32, 40211 Düsseldorf,
Deutschland
80 Queen Street, Auckland, 1010,
New Zealand
Viale Castro Pretorio 122, 00185 Roma,
Italia
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
153-155 Xujiahui Road, Huangpu Area,
Shanghai, 200021, China
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
Master Samulesgatan 67, Stockholm 11121,
Sweden
3806 Central Plaza, 18 Harbour Road,
Wanchai, Hong Kong
60 Paya Lebar Road, #09-38,
Paya Lebar Square, 409051, Singapore
Level 10 Menara LGB, 1 Jalan Wan Kadir,
Taman Tun Dr Ismail, 60000 Kuala Lumpur,
Malaysia
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
Willow Road, Lenton, Nottingham,
NG7 2WS, UK
Unit 233/234, 2/F, Pioneer Centre, 750
Nathan Road, Kowloon, Hong Kong
Proportion of nominal
value of issued shares
held by:
Description of
shares held
£1 ordinary
Company
100%
Subsidiary
Company
$1 common
stock
Can $1
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
euro 1
euro 1
Aus $1
euro 1
NZ $1
euro 1
100%
100%
Retailer of games and miniatures
Retailer of games and miniatures
100%
100%
Distributor and retailer of games
and miniatures
Retailer of games and miniatures
100%
Retailer of games and miniatures
100%
Retailer of games and miniatures
£1 ordinary
100%
£1 ordinary
£1 ordinary
Owners capital
Holding company for overseas
subsidiary companies
100% Holding company for US subsidiary
companies
Intermediary holding company for
US subsidiary companies
Distributor and retailer of games
and miniatures
100%
100%
£1 ordinary
100%
Trustee
SEK 100
100%
Retailer of games and miniatures
HK $1 ordinary
SG $1 ordinary
MYR 1 ordinary
100%
100%
100%
Distributor and retailer of games
and miniatures
Distributor and retailer of games
and miniatures
Distributor and retailer of games
and miniatures
£1 ordinary
100%
£1 ordinary
100%
£1 ordinary
100%
HK $10 ordinary
100%
Dormant
Dormant
Dormant
Dormant
All of the above entities are included in the consolidated financial statements 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.
54 Games Workshop Group PLC
17. Deferred tax assets
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 year
Exchange differences
Income statement credit/(charge)
Credited directly to retained earnings
End of year
Analysis of the movement in deferred tax assets and liabilities is as follows:
Group
2017
£000
2,288
3,111
5,399
Group
2017
£000
3,219
408
1,758
14
5,399
2016
£000
2,274
945
3,219
2016
£000
3,621
105
(507)
-
3,219
Group
At 31 May 2015 and 1 June 2015
Credited/(charged) to the income statement
Exchange differences
At 29 May 2016 and 30 May 2016
Credited/(charged) to the income statement
Credited to equity
Exchange differences
At 28 May 2017
Accelerated
depreciation
£000
1,294
49
19
1,362
226
-
109
1,697
Development
costs
£000
(705)
(138)
-
(843)
791
-
-
(52)
Losses
available
for offset
£000
1,787
(401)
65
1,451
(683)
-
166
934
Company
2017
£000
1
28
29
Company
2017
£000
43
-
(14)
-
29
Other
£000
1,245
(17)
21
1,249
1,424
14
133
2,820
2016
£000
2
41
43
2016
£000
7
-
36
-
43
Total
£000
3,621
(507)
105
3,219
1,758
14
408
5,399
Other deferred tax assets include deferred tax on adjustments for profit in stock arising from intra-group sales of £1,475,000 (2016: £861,000), tax relief on
exercise of share options of £341,000 (2016: £18,000) and tax relief on intangible assets of £278,000 (2016: £318,000).
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 28 May 2017 or 29 May 2016 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 years presented.
Company
At 31 May 2015 and 1 June 2015
Credited to the income statement
At 29 May 2016 and 30 May 2016
Charged to the income statement
At 28 May 2017
18. Inventories
Group
Raw materials
Work in progress
Finished goods and goods for resale
Accelerated
depreciation
£000
2
-
2
(1)
1
Other
£000
5
36
41
(13)
28
2017
£000
188
405
11,828
12,421
Total
£000
7
36
43
(14)
29
2016
£000
120
365
8,055
8,540
The Group holds no inventories at fair value less costs to sell.
During the year, the Group utilised an inventory provision of £901,000 (2016: £916,000) and £1,376,000 (2016: £1,805,000) has been charged to the income
statement.
The Company holds no inventories at either year end.
55 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
Loans to Company shareholders
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
2017
£000
4,990
(345)
4,645
5,833
1,678
-
-
1,901
14,057
222
859
-
1,081
12,976
2016
£000
4,537
(259)
4,278
5,304
1,467
-
-
-
11,049
206
723
-
929
10,120
2017
£000
-
-
-
21
-
2,479
3,957
1,901
8,358
-
-
3,957
3,957
4,401
2016
£000
-
-
-
20
-
1,496
3,900
-
5,416
-
-
3,900
3,900
1,516
As a result of a procedural oversight, 6 pence per share of the dividend paid on 2 June 2017 is being treated as an unlawful dividend in the annual report and
is shown within trade and other receivables. Although the Company always had sufficient reserves to pay this dividend at the time that it was made, the
Companies Act 2006 requires this to be demonstrated by reference to interim accounts filed at Companies House prior to payment. Those interim accounts,
however, were not filed with Companies House until after the relevant dividend had been paid and after the lapse had been identified. No fines or other
penalties have been incurred by the Company. A resolution is to be proposed at the AGM in order to remedy this oversight.
The effective interest rate on non-current loans to related parties is charged at LIBOR plus 1% in both years. All non-current receivables are due within five
years of the balance sheet date.
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. 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.
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
2017
2016
Not impaired
£000
484
-
-
484
Impaired
£000
3
174
3
180
Total
£000
487
174
3
664
Not impaired
£000
1,090
68
-
1,158
Impaired
£000
34
47
60
141
Total
£000
1,124
115
60
1,299
In addition to the above, current debt of £165,000 (2016: £118,000) has been impaired.
Provision for impairment of receivables
Movements on the provision for impairment of trade receivables are as follows:
Group
At 31 May 2015 and 1 June 2015
Charge for the year
Exchange differences
Receivables written off during the year as uncollectible
At 29 May 2016 and 30 May 2016
Charge for the year
Exchange differences
Receivables written off during the year as uncollectible
At 28 May 2017
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
56 Games Workshop Group PLC
£000
252
242
1
(236)
259
212
3
(129)
345
2016
£000
5,007
2,080
2,360
1,602
11,049
2017
£000
6,927
1,982
3,151
1,997
14,057
20. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
Cash and cash equivalents
The Group’s cash and cash equivalents are repayable on demand.
There were no utilised borrowing facilities at 28 May 2017 or 29 May 2016.
21. Financial risk factors
Group
Company
2017
£000
16,307
1,603
17,910
2016
£000
10,998
777
11,775
2017
£000
746
-
746
2016
£000
843
-
843
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 years.
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 (2016: 15%)
15% appreciation of the euro (2016: 15%)
A depreciation of the stated currencies would have an equal and opposite effect.
There is no impact on equity gains or losses.
2017
Income
gain
£000
561
28
2016
Income
gain/(loss)
£000
251
(187)
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.
57 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 property
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
Loans to Company shareholders
Cash and cash equivalents
Total
2017
Between
1 and 2
years
£000
-
47
47
Between
2 and 5
years
£000
-
24
24
Within
1 year
£000
11,448
433
11,881
More
than
5 years
£000
-
-
-
2016
Between
1 and 2
years
£000
141
159
300
Within
1 year
£000
9,144
614
9,758
Between
2 and 5
years
£000
-
124
124
Within
1 year
2017
£000
606
606
More
than
5 years
£000
-
-
-
Within
1 year
2016
£000
675
675
Group
Loans and receivables
2016
£000
2017
£000
Company
Loans and receivables
2016
£000
2017
£000
4,645
1,035
1,678
-
-
1,901
17,910
27,169
4,278
696
1,467
-
-
-
11,775
18,216
-
-
-
2,479
3,957
1,901
746
9,083
-
-
-
1,496
3,900
-
843
6,239
Within the Group net cash and cash equivalents are overdrafts of £nil (2016: £7,938,000) 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
2016
£000
2017
£000
Company
Financial liabilities at
amortised cost
2016
£000
2017
£000
5,480
3,539
2,429
-
11,448
4,417
2,473
2,395
-
9,285
40
5
241
320
606
5
8
343
319
675
Deferred income balances and other taxes and social security payables have been excluded from the above as they are not financial liabilities.
58 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
2017
£000
5,480
1,207
3,539
3,052
3,237
-
16,515
Company
2017
£000
2016
£000
2016
£000
4,417
1,042
2,473
2,917
1,995
-
12,844
40
50
5
241
-
320
656
5
43
8
343
- -
319
718
Group
2017
£000
494
2016
£000
488
Company
2017
£000
-
2016
£000
141
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 for other liabilities and charges
Analysis of total provisions:
Group
Current
Non-current
Total provisions for other liabilities and charges
Group
At 30 May 2016
Charged/(credited) to the income statement:
-
Additional provisions
- Unused amounts reversed
Exchange differences
Utilised
At 28 May 2017
2017
£000
8,841
1,882
4,937
1,349
17,009
2016
£000
7,521
1,557
3,346
908
13,332
2017
£000
689
495
1,184
Employee
benefits
£000
547
Property
£000
897
186
(371)
57
( (265)
504
165
(12)
47
(67)
680
2016
£000
823
621
1,444
Total
£000
1,444
351
(383)
104
(332)
1,184
The Company had no provisions at either year 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 2021. The estimated liability is discounted to its present value
using a discount rate of 0.55% (2016: 0.96%).
59 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
25. Share capital
Group and Company
At 1 June 2015
Shares issued under employee sharesave scheme
At 29 May 2016
Shares issued under employee sharesave scheme
At 28 May 2017
Number of shares
(thousands)
32,064
57
32,121
14
32,135
Called up
share capital
£000
1,603
3
1,606
1
1,607
Share
premium
account
£000
10,218
301
10,519
80
10,599
Total
£000
11,821
304
12,125
81
12,206
During the year 14,086 ordinary shares were issued (2016: 57,157). The total authorised number of shares is 42,000,000 shares (2016: 42,000,000 shares)
with a par value of 5p per share (2016: 5p per share). All issued shares are fully paid.
26. Other reserves
Group
Beginning of year
Exchange differences on
translation of foreign operations
End of year
Capital
redemption
reserve
£000
101
2017
Translation
reserve
£000
2,616
-
101
2,663
5,279
Other
reserve
£000
(1,050)
-
(1,050)
2016
Capital
redemption
reserve
£000
101
Translation
reserve
£000
2,131
-
101
485
2,616
Other
reserve
£000
(1,050)
-
(1,050)
Total
£000
1,667
2,663
4,330
Total
£000
1,182
485
1,667
The other reserve was created on flotation following a payment to the previous holders of the Company’s ordinary shares.
As at 28 May 2017, the Company’s capital redemption reserve was £101,000 (2016: £101,000). The Company had no other reserves in addition to the
capital redemption reserve at either year end.
27. Retained earnings
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 and 30 May 2016
Profit attributable to owners of the parent
Current tax on share options
Deferred tax on share options
Share-based payments
Dividends to Company shareholders
At 28 May 2017
Group
£000
38,522
13,496
(3)
193
(12,837)
39,371
30,547
5
14
160
(23,801)
46,296
Company
£000
23,082
13,363
-
193
(12,837)
23,801
26,594
-
-
160
(23,801)
26,754
28. Reconciliation of profit/(loss) to net cash from operating activities
Group
Company
Operating profit/(loss)
Depreciation of property, plant and equipment
Net (reversal) of impairment/impairment of property, plant and equipment
Loss on disposal of property, plant and equipment (see below)
Impairment of intangible assets
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 in inventories
- (Increase)/decrease in trade and other receivables
- Increase/(decrease) in trade and other payables
- - (Decrease)/increase in provisions
Net cash from operating activities
60 Games Workshop Group PLC
2017
£000
38,323
6,107
(55)
111
833
14
2,900
1,217
160
-
(2,984)
(379)
3,491
(368)
49,370
2016
£000
16,860
5,305
28
28
-
39
3,853
1,232
193
-
(701)
(293)
(198)
436
26,782
2017
£000
(1,664)
-
-
-
-
-
-
-
-
27,900
-
(522)
(203)
-
25,511
2016
£000
(2,164)
-
-
-
-
-
-
-
-
15,000
-
273
125
-
13,234
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 year.
2017
£000
111
(111)
-
2016
£000
28
(28)
-
The Group disposed of intangible assets with a net book amount of £14,000 during the year (2016: £39,000). There were no proceeds on disposal in either
year and hence a loss on disposal equivalent to the net book value was recorded.
The Company sold no other intangibles during either year.
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
30 May 2016
£000
11,775
11,775
As at
30 May 2016
£000
843
843
Cash
flow
£000
5,506
5,506
Cash
flow
£000
(102)
(102)
Exchange
movement
£000
629
629
As at
28 May 2017
£000
17,910
17,910
Exchange
movement
£000
5
5
As at
28 May 2017
£000
746
746
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 year end.
Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are payable as follows:
2017
£000
1,102
2016
£000
609
Group
Within 1 year
Between 1 and 5 years inclusive
In over 5 years
2017
Other
property
£000
544
62
-
606
Retail stores
£000
7,767
13,072
259
21,098
Other
£000
105
98
-
203
Retail stores
£000
7,595
11,656
265
19,516
2016
Other
property
£000
526
493
-
1,019
The Company had no operating lease commitments at either year end.
Inventory purchase commitments
Group
Finished goods
Components
Raw materials
2017
£000
2,587
1,316
110
Other
£000
154
148
-
302
2016
£000
1,462
1,135
92
The Company had no inventory purchase commitments at either year end.
Pension arrangements
The Group and Company operate defined contribution schemes. Commitments in respect of pensions are included within prepayments and accruals.
61 Games Workshop Group PLC
NOTES TO THE FINANCIAL STATEMENTS continued
31. Contingencies
The Group has no contingent liabilities in respect of the potential reversionary interest in sub-let leasehold properties (2016: £46,000).
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 £nil (2016: £1,424,000).
For the year ended 28 May 2017, the subsidiary companies listed below are exempt from the requirements of the Companies Act 2006 relating to the audit
of individual financial statements 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 year 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 Limited
Nature of transaction
Recharges
Dividends receivable
Receivables/(payables) outstanding between the Company and its subsidiaries are shown below:
2017
£000
366
27,900
2016
£000
382
15,000
Subsidiary
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 Hong Kong Limited
Amounts owed by
subsidiaries
Amounts owed to
subsidiaries
2017
£000
2,268
203
2
1
1
1
-
3
-
-
2,479
2016
£000
1,275
120
4
26
2
2
-
1
18
48
1,496
2017
£000
-
-
-
-
-
-
(320)
-
-
-
(320)
2016
£000
-
-
-
-
-
-
(319)
-
-
-
(319)
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
Games Workshop Hong Kong Limited
Games Workshop Malaysia Sdn. Bhd.
Amounts owed by
subsidiaries
2017
£000
6,779
(6,779)
3,900
55
2
3,957
2016
£000
6,779
(6,779)
3,900
-
-
3,900
T H F Kirby provided consultancy at a cost of £35,000 during the prior year.
33. Subsequent events
A dividend of 20 pence per share was declared after the balance sheet date and was paid before the signing of these financial statements.
62 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
Basic earnings per ordinary share pre-change in accounting estimates
2017
£000
158,114
30,832
-
7,491
38,323
87
(7)
38,403
(7,856)
30,547
95.1p
95.1p
91.2p
2016
£000
118,069
10,921
-
5,939
16,860
93
(5)
16,948
(3,452)
13,496
42.1p
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
38.3p
2014
£000
123,501
15,355
(4,500)
1,442
12,297
106
(7)
12,396
(4,389)
8,007
25.2p
36.1p
25.2p
2013
£000
134,597
20,229
-
1,025
21,254
176
(35)
21,395
(5,077)
16,318
51.5p
51.5p
51.5p
FINANCIAL CALENDAR
Annual general meeting
Announcement of half year results
Financial year end
Announcement of final results
13 September 2017
January 2018
3 June 2018
July 2018
63 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 13 September 2017 for the following
purposes:
Ordinary business
As ordinary business to consider and, if thought fit, to pass the following resolutions 1 to 7 as ordinary resolutions:
Resolution 1
To receive the Company's annual financial statements for the year ended 28 May 2017 together with the directors' report, the
remuneration report and the independent auditors’ report on those financial statements, the auditable part of the remuneration
report and the directors’ report.
Resolution 2
To re-elect R F Tongue as a director.
Resolution 3
To re-elect C J Myatt as a director.
Resolution 4
To re-elect N J Donaldson as a director.
Resolution 5
To re-appoint PricewaterhouseCoopers LLP as independent auditors to hold office until the conclusion of the next general meeting
at which financial statements are laid by the Company.
Resolution 6
To authorise the directors to fix the auditors’ remuneration.
Resolution 7
To approve the remuneration report (excluding the directors’ remuneration policy set out on pages 24 to 27 for the year ended 28 May
2017).
Special business
To consider and, if thought fit, pass the following resolutions, of which resolution 8 will be proposed as an ordinary resolution and
resolutions 9 to 11 will be proposed as special resolutions.
Resolution 8
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 £530,286 provided that this authority shall, unless renewed, varied or revoked by the Company, expire on 12 December
2018 or, if earlier, the date of the next annual general meeting of the Company save that the Company may, before such expiry,
make offers or agreements which would or might require Relevant Securities to be allotted and the directors may allot Relevant
Securities in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This
resolution revokes and replaces all unexercised authorities previously granted to the directors to allot Relevant Securities but without
prejudice to any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.
Relevant Securities means: (i) shares in the Company other than shares allotted pursuant to an employee share scheme (as defined
by section 1166 of the Act), a right to subscribe for shares in the Company where the grant of the right itself constituted a Relevant
Security or a right to convert securities into shares in the Company where the grant of the right itself constituted a Relevant Security;
(ii) any right to subscribe for or to convert any security into shares in the Company other than rights to subscribe for or convert any
security into shares allotted pursuant to an employee share scheme (as defined by section 1166 of the Act). References to the
allotment of Relevant Securities in this resolution include the grant of such rights.
Resolution 9
That subject to the passing of resolution 8 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 8 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)
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 £80,346.
(b)
64 Games Workshop Group PLC
Resolution 9 continued
The power granted by this resolution will expire on 12 December 2018 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 10
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:
(c)
(d)
(e)
(f)
(g)
the authority hereby conferred shall expire at the conclusion of the next annual general meeting of the Company or on 12
December 2018 whichever is the earlier;
the maximum aggregate number of ordinary shares that may be purchased is 3,213,856;
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; and
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.
Resolution 11
That:
(a)
(b)
(c)
(d)
(e)
(f)
£1,901,000 of the dividend of the Company paid on 2 June 2017 in technical breach of the Companies Act 2006 be treated as a loan
to the shareholders of the Company who received such dividends (the ‘Recipients’) (an ‘Unlawful Dividend’);
the directors of the Company be and are hereby authorised to appropriate distributable profits of the Company (as shown in the
interim accounts of the Company made up to 26 February 2017 and filed with Companies House on 17 July 2017) to the payment of
£1,901,000 which shall be for an amount equal to the Unlawful Dividend, and on the Company’s ordinary shares (a ‘Rectification
Dividend’);
the Rectification Dividend shall be made to the relevant Recipients of the corresponding original Unlawful Dividend;
the Rectification Dividend shall not be satisfied in cash but shall be satisfied by the release of each shareholder of the Company
who was a recipient of the Unlawful Dividend from the liability to repay the amount already paid to such shareholder in the form of
the Unlawful Dividend;
any and all claims which the Company may have in respect of the payment of the Unlawful Dividend and/or the Rectification
Dividend against its shareholders who received the Unlawful Dividend be waived and released and deeds of release in favour of
such shareholders be entered into by the Company in the form of the deeds produced to this meeting and signed by the Chairman
for the purpose of identification; and
any breach of duty committed by the directors of the Company arising out of or in connection with the approval, declaration or
payment of the Unlawful Dividend be and is hereby ratified and that any and all claims which the Company may have against its
directors (both past and present) arising out of or in connection with the approval, declaration or payment of the Unlawful
Dividend be waived and released and that a deed of release in favour of each of the Company’s relevant directors be entered into
by the Company in the form of the deeds produced to this meeting and signed by the chairman for purposes of identification.
By order of the board
R F Tongue
Company secretary
24 July 2017
Registered office:
Willow Road, Lenton
Nottingham
NG7 2WS
Registered in England and Wales under number 2670969
65 Games Workshop Group PLC
NOTICE OF ANNUAL GENERAL MEETING continued
Notes
1. Only those members registered on the Company's register of members at 10.00 am on 11 September 2017 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 24 July 2017 (being the last practical date prior to the publication of this notice), the Company's issued share capital comprised 32,138,568
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 24 July 2017 is 32,138,568. 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.
66 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.
Explanatory notes to the notice of annual general meeting
Resolution 1 – Financial statements
This is a standard resolution common to all annual general meetings.
Resolutions 2 to 4 – Re-election of directors
The following directors will stand for re-election in accordance with the UK Corporate Governance Code and the Company’s articles of association:
R F Tongue
C J Myatt
N J Donaldson
Each of the above directors has indicated their willingness to offer themselves for re-election. The board, having considered the mix of skills, knowledge and
experience of the directors confirms that each director continues to perform their duties effectively, showing integrity and high ethical standards whilst
maintaining sound, independent judgement in respect of all decisions taken at board level.
Biographical details for each of the directors can be found on page 15 of the 2017 annual report.
Resolutions 5 and 6 – Re-appointment of auditors and auditors remuneration
The Company is required to appoint an auditor at each meeting at which financial statements are presented and PricewaterhouseCoopers LLP have
indicated their willingness to continue in office. Accordingly, resolutions 5 and 6, subject to the approval of the shareholders of the Company, re-appoints
PricewaterhouseCoopers LLP as auditors of the Company and authorises the directors to determine the remuneration of the auditors.
67 Games Workshop Group PLC
NOTICE OF ANNUAL GENERAL MEETING continued
Explanatory notes to the notice of annual general meeting continued
Resolution 7 – Directors’ remuneration
Shareholders will be requested to approve the directors’ remuneration report (excluding the directors’ remuneration policy) for the financial year ended 28
May 2017.
Resolution 8– Directors’ power to allot relevant securities
Generally, the directors may only allot shares in the Company (or grant rights to subscribe for, or to convert any security into, shares in the Company) if they
have been authorised to do so by shareholders.
In line with guidance issued by the Investment Association, if passed, resolution 8 will authorise the directors to allot ordinary shares in the Company (and to
grant rights to subscribe for, or to convert any security into, ordinary shares in the Company) in connection with a rights issue only up to an aggregate
nominal amount of £530,286 (as reduced by the aggregate nominal amount of any shares allotted or rights granted under resolution 9). This amount (before
any reduction) represents approximately 33% of the issued ordinary share capital of the Company as at 24 July 2017, being the last practicable date before
the publication of this document. The directors intend to follow emerging best practice as regards the use of this authority, including as to the requirement
for directors to stand for re-election.
If given, this authority will expire at the conclusion of the Company’s next annual general meeting or 15 months from the passing of the resolution
(whichever is earlier). It is the directors’ intention to renew the allotment authority each year.
The directors have no current intention to exercise either of the authorities sought under resolution 8. However, the directors consider that it is in the best
interests of the Company to have the authorities available so that they have the maximum flexibility permitted by institutional shareholder guidelines to
allot shares or grant rights without the need for a general meeting should they determine that it is appropriate to do so to respond to market developments
or to take advantage of business opportunities as they arise.
Resolution 9 – Disapplication of pre-emption rights on equity issues for cash
Resolution 9, if passed, would enable the directors to allot shares for cash on a non pre-emptive basis in limited circumstances. It is proposed to authorise
the directors to issue shares for cash up to an aggregate nominal amount of £80,346 (which represents approximately 5% of the Company’s issued share
capital as at 24 July 2017), without having to first offer them to shareholders in proportion to their existing holdings. In addition, in accordance with normal
practice, the resolution would enable the board to deal with overseas shareholders and fractional entitlements as it thinks fit in the context of any rights
issue or open offer.
If given, this authority will expire at the conclusion of the Company’s next annual general meeting or 15 months from the passing of the resolution
(whichever is earlier). It is the directors’ intention to renew this authority each year.
There are no present plans to exercise this authority.
Resolution 10 - Market purchase of own shares
A company may only purchase its own shares by either an off-market purchase, in pursuance of a contract approved in advance in accordance with section
694 of the Act or by a market purchase, authorised in accordance with section 701 of the Act. A ‘market purchase’ is one made through a ‘recognised
investment exchange’. Although the Act only requires an ordinary resolution, LR 12.4.7 of the Listing Rules requires the resolution to be passed as a special
resolution (the ABI also recommend that the resolution should be passed as a special resolution). This resolution 10 authorises market purchases of the
Company’s own shares to be made but only within the limitations specified. In accordance with Investment Association guidelines the maximum number of
shares purchased under this authority must not exceed 3,213,856 ordinary shares. The resolution also states the maximum price which may be paid being 5p
per ordinary shares and the maximum price being 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.
As recommended by the Investment Association the Company renews this authority on an annual basis at each annual general meeting.
The directors have no current intention of exercising this authority to purchase the Company’s ordinary shares. The Company will only exercise this authority
to make such a purchase in the market if the directors consider it is in the best interests of the shareholders generally to do so.
The Company is permitted to hold shares it has purchased in treasury, as an alternative to cancelling them. Shares held in treasury may subsequently be
cancelled, sold for cash or used to satisfy options exercised under any of the Company’s share schemes. Whilst held in treasury, the shares are not entitled
to receive any dividend or dividend equivalent (apart from any issue of bonus shares) and have no voting rights. The directors believe it is appropriate for
the Company to have the option to hold its own shares in treasury if, at a future date, the directors exercise this authority. The directors will have regard to
investor group guidelines which may be in force at the time of any such purchase, holding or re-sale of shares held in treasury.
If given, this authority will expire at the conclusion of the Company’s next annual general meeting or 15 months after the passing of the resolution
(whichever is earlier). It is the directors’ intention to renew this authority each year.
68 Games Workshop Group PLC
Explanatory notes to the notice of annual general meeting continued
Resolution 11– Unlawful dividend
The resolutions deal with a technical issue that has come to light in respect of the dividend that was paid by the Company to its shareholders on 2 June 2017.
Under the Companies Act 2006 (the ‘Act’) a dividend paid by a public company must not exceed the amount of its distributable profits reported in its last
annual accounts laid before such company in general meeting (the ‘Relevant Accounts’). In the event that a public company actually has the requisite
distributable reserves at the time a dividend is proposed but its distributable profits reported in its Relevant Accounts are insufficient to declare such a
dividend (as these Relevant Accounts may have been prepared a long time in advance of the proposed dividend) then it should prepare interim accounts in
accordance with the provisions of the Act and file them at Companies House showing that it has the required distributable profits at the time the dividend is
paid. Failure to prepare and file such interim accounts is a technical breach of the Act and renders the affected dividend as unlawful.
In respect of the Unlawful Dividend (as set out above), the Company’s Relevant Accounts did not show sufficient distributable reserves to cover the whole
amount of the dividend paid on 2 June 2017. At the time the Unlawful Dividend was paid, the Company had in fact the requisite distributable reserves by
reference to its latest management accounts. However, prior to the payment of the Unlawful Dividend, interim accounts had not been prepared and filed at
Companies House in accordance with the Act. As a result, the Company has decided to take a prudent approach and to treat the dividend that was paid in
technical breach of the Act as unlawful.
Consequently, the Company may have claims under the Act against the Recipients (being present and past shareholders that were recipients of the Unlawful
Dividend) to recover the amounts paid in technical infringement of the Act (totalling £1,901,000) in aggregate (the ‘Total Sum’)). The Company may also
have claims against those directors who participated at the relevant board meeting at which the decision was taken to pay the Unlawful Dividend.
It is clearly not the Company’s intention to make any such claim against either the shareholders or directors. The Company has been advised by its external
legal advisors that this matter can be rectified by the passing of a resolution by the shareholders to ratify this breach and to put the shareholders and
directors into the position which was always intended. This will be effected by treating the Unlawful Dividend as a loan to shareholders who received it and
the shareholders’ obligation to repay the relevant loan will be satisfied by the declaration and approval at the AGM of a new dividend of the Company equal
to the amount of the loan received by each shareholder. In effect the new dividend will be netted off against the loans so that no further payment will be
required to be made to or by shareholders in respect of the Unlawful Dividend or the new dividend so declared.
The resolutions will therefore be proposed at the AGM to:
treat the Unlawful Dividend as a loan to shareholders;
approve a new dividend of the Company which is (i) equal in aggregate to the Total Sum, (ii) payable to the relevant Recipients of the Unlawful Dividend
and (iii) shall be satisfied by the release of each Recipient from their liability to repay the amount already paid to them in the form of the Unlawful
Dividend (the ‘Dividend Rectification’);
waive any rights of the Company against the Recipients of the Unlawful Dividend;
waive any rights of the Company against the directors who approved the payment of the Unlawful Dividend and ratify their breaches of duty; and
approve the Company entering into deeds of release in favour of such shareholders and the relevant directors in respect of the Unlawful Dividend. Draft
forms of the deeds are available for inspection at the Company’s registered office until the time of the meeting and at the place of the meeting from 15
minutes before the meeting until it ends.
Shareholders will note that, whilst the Dividend Rectification is referred to in the financial statements for the Company for the financial year ended 28 May
2017 (the ‘2017 Annual Report’) enclosed with this document, the Company’s distributable profits shown in the 2017 Accounts have been adjusted to reflect
the impact of the Unlawful Dividend. Accordingly, the Company has prepared the 2017 Annual Report which properly reflects the treatment of the Unlawful
Dividend as a loan, as outlined above and show the Total Sum within current assets. The interim accounts for the period to 26 February 2017 have sufficient
distributable profits to cover the new dividend to be proposed at the AGM. A copy of such interim accounts has been filed at Companies House.
The board unanimously recommend shareholders to vote in favour of the resolutions. The directors believe that the dividend rectification is in the best
interests of the Company and the shareholders of the Company as a whole; however, the Act prevents them from voting on the resolutions in respect of
their own shareholdings and also prevents them from recommending that you vote in favour of this resolution in respect of your shareholding. This is
because part of resolution 11, if passed, releases the directors from any claim which the Company may have against them in respect of the Unlawful
Dividend and they are therefore personally interested in the passing of such resolution.
69 Games Workshop Group PLC