'Flab-free' Games Workshop boosts profits and plots growth28 July 2010
Games Workshop is free from the shackles of debt charges after an efficiency drive helped it pay back all its borrowings.
Workers at the Lenton business agreed a pay freeze to help the firm pay off the money, while a wider cost-cutting drive saved more than £4 million in the last year.
Paying back the debt will save the company at least £1.5 million a year - the amount of money it was paying in interest charges previously.
Now, the company has £17 million cash in the bank, some of which will be spent on paying shareholders a 25p-a-share dividend, but most being invested on a sales drive aimed at improving its long-term performance.
Games Workshop manufactures tabletop fantasy wargames like Warhammer, where painted plastic figures battle it out in strategic clashes between different armies.
They are sold through Games Workshop's own hobby centres, independent retailers around the world and through the firm's website.
It's seen as a largely recession-proof business, with games bought and used by a dedicated audience which ranges from teenagers to people in their thirties and beyond.
Despite this, Games Workshop's sales slipped from £125.7 million in 2008-9 to £121.8 million in the year to the end of May, with poor performance from its outlets on the continent taking most blame.
But the cost-cutting drive meant that even though sales were down pre-tax profits shot up from £7.5 million to £16.1 million - with staff enjoying £1,000 payments under a profit-share scheme.
The costs drive saw salaries frozen, jobs cut in hobby centres and regional management, shops move to sites with lower rent, and cash tied up in stock reduced through an automated system.
Games Workshop says the result is that its profit margins are now running at 12.7 per cent and its return on cash investment at a whopping 44 per cent - so for every £1 of capital it invests it gets a 44p return.
Chief executive Mark Wells said that the company was now operating far more efficiently than it had earlier in the decade, when both sales and share price rocketed on the back of a boom brought on by a game licensed from the Lord of the Rings movie cycle.
"We got flabby in the Lord of the Rings years," he told the Post. "We grew fast and when we grew we added more heads.
"We took our medicine a few years ago and it's been a case of fine-tuning."
The "medicine" took the form of a multi-million restructuring exercise, which saw jobs go at its Willow Road head office, where it now employs around 600 people.
This time round, jobs have gone from some of the hobby centres, where the focus is on a one-man format.
While Mr Wells says the company will keep a close eye on costs, its main priority for the rest of this and next year will be the launch of a new Warhammer game and new sales training for the people who run its hobby centres.
One thing Mr Wells says won't be cut is its commitment to manufacturing its figures in Nottingham.
He told the Post: "One thing that really gets me going is people talking down UK manufacturing. We have got staff here who can manufacture the best miniatures in the world."