Revisiting Games Workshop

Plus a podcast with The Dutch Investors 🎧

Author’s Note - I am an investor in Games Workshop which makes up around 3% of my portfolio. I was delighted to be asked to speak about the company on the

The Dutch Investors

podcast. You can listen to it here -

To follow on from my conversation, I decided to publish the research that went into the discussion.

Metrics (as of April 2025)

• Market Cap = £4.58B

• EV = £4.45B

• FCF = £163M

• Price / Sales = 8.7

• P/FCF = 28.9

• FCF Yield = 3.46%

• Debt / Equity = 0

• EBIT = £204M

• EV/EBIT = 21.8

Secret Sauce DCF = £115

Simply Wall St DCF = £109

Introduction

I previously wrote about Games Workshop back in 2021. It was my first ever write-up on Substack which you can read here;

Games Workshop Analysis

Thankfully, not much has changed with the business over the past four years. It remains a of high-margin, vertically integrated manufacturer with strong IP and an engaged community.

The company has experienced continued growth and will to push further into media having announced a partnership with Amazon in 2023, who have plans to expand into films and television series.

Business Model

Games Workshop is a cash generating machine with a dividend-first approach, paying out around 75% of earnings to shareholders.

The business has continued to expand but management have focused on returning excess capital to shareholders rather than reinvest in acquisitions or large scale expansions.

Games Workshop owns and operates over 548 of retail stores in 23 countries. The company has 412 (75%) single staff stores, which are small sites operated by only one employee. Stores are continuously reviewed to ensure they remain profitable. Games Workshop earns annual revenue of around £216k per store.

Over the past decade, the business has quietly moved away from the red and yellow logo on the storefronts and rebranded as ‘Warhammer’ - the brand customers are familiar with.

Games Workshop generates recurring revenue with a diversified strategy; continual releases of new and updated models, sales of consumables, alongside digital subscriptions and community-driven events.

Games Workshop’s business model prioritises scarcity over overproduction. The company rarely discounts products, but instead relies on controlled supply, made-to-order sales and strategies to manage inventory.

This approach maintains high margins and ensures collectors view Warhammer models as valuable rather than clearance items.

Slow-moving items are often bundled with more popular products, repositioning them in new box sets, or slowly removing them from sale.

Revenue Segments

Retail - 8.6% growth YoY

Games Workshop branded sites which are often single employee locations focusing solely on Warhammer products. The stores act as brand experience hub, with in-store gaming tables, painting tutorials and community events.

Beyond miniatures, recurring sales of paints, brushes and other hobby supplies contribute to higher average spending per customer. New customers are encouraged to create a “My Warhammer" account which integrates them into the branded universe.

Trade - 16.3% growth YoY

Trade involves sales to independent retailers, such as hobby shops, comic book stores, and large online retailers including Wayland Games, Element Games and The Warhammer Store on Amazon.

Trade distribution has grown faster than retail with large-scale outlets, such as Barnes & Noble, carrying Warhammer starter sets.

Online - Down 4.2% YoY

The online segment of Games Workshop sells directly to customers. This reduces the need for physical premises and reduces direct costs.

The website segment includes Warhammer+, a high margin media platform for dedicated fans. Launched in 2021, Warhammer+ offers exclusive shows, including Angels of Death (Warhammer 40,000) Hammer and Bolter (Warhammer 40,000 & Age of Sigmar), animations plus access to a digital vault.

Warhammer+ costs £5.99 per month. With 176,000 subscribers (2022/23: 136,000), it generates around £12.65m in annual revenue (£10.5m after VAT).

Geographic Segments

78% of Games Workshop’s sales coming from outside the UK.

UK - Up 6.9% to £34.3 million
The company’s headquarters are located in Nottingham. Around half of all retail outlets are situated across the UK and continental Europe.

Warhammer World is Games Workshop’s flagship store, located at the HQ in Nottingham. The site includes a gaming hall, museum, and visitor centre showcasing custom-built dioramas. Exclusive Forge World models are also available in-store. The venue is also used to host global tournaments and major events.

North America (33% of stores) - up 10.0% to £45.1 million
North America has approximately a third of the official outlets. Stores in the region tend to be larger and staffed with more than one employee. CEO Kevin Rountree has overseen a vast expansion of Games Workshop's American business, which has grown from 84 stores to 185 during his 10 year tenure.

Games Workshop is on track to have 200 profitable stores in North America by May 2025.

Other Regions (15–20%)
The remaining distribution of stores are spread across Asia, Australasia and emerging markets. These geographic segments are smaller in number but are key to the company’s long-term expansion strategy.

Sales in Europe are up 15.6% to £24.4 million with all countries in growth. Retail sales in Asia were also up 21.4% to £3.4 million, particularly in countries such as China and Japan.

Such a small number of retail sales demonstrates a potential opportunity in Asia. Work is on-going for the first store in South Korea and there is store opening plan for Japan with over 30 locations identified for a Warhammer units over the next five years.

Licensing - 5.9% of revenue

Around 70% of Games Workshop licensing revenue is made up from video games, which include the following;

• Total War: Warhammer – Achieved significant success, bringing strategy gamers into the Warhammer Fantasy setting.

• Warhammer 40K: Darktide – Co-op shooter appealing to FPS fans.

• Warhammer 40K: Space Marine 2 - Space Marine 2 is a 2024 third-person shooter, with hack and slash elements, video game developed by Saber St. Petersburg and published by Focus Entertainment. The sequel to Warhammer 40,000: Space Marine, it was released for PlayStation 5, Windows, and Xbox Series X/S on 9 September 2024. The game was largely positively received and sold 6 million copies in only 4 months.

• Mobile Games – Titles like Tacticus and Lost Crusade engage younger, mobile-first audiences.

Brand & IP

We believe our IP to be among the best in the world. - 2024 Annual Report

Games Workshop is unique in the fact that the company has complete control over the brand, IP and narrative. Over the past 40-50 years the company has developed a universe unlike any other.

Games Workshop owns Black Library, its publishing division responsible for novels, audiobooks, and other media (like art books and graphic novels) set in the Warhammer universes, including 40,000, Fantasy Battle and Age of Sigmar.

Despite creating a unique universe of IP, the company has often struggled to unlock and fully exploit their valuable IP. The strategic partnership with Amazon can support a further unlock. The deal will adapt the Warhammer 40,000 universe into films and television series, potentially boosting global recognition and revenue streams.

Games Workshop IP first featured in the short format episode of Secret Level on Amazon Prime.

Product Overview

Games Workshop's revenue is primarily driven by two core product lines, Warhammer Age of Sigmar and Warhammer 40,000. The company does not publicly disclose the exact percentage of sales attributed to each franchise.

• Warhammer 40K - (Approx 60%+ of revenue) Dominates sales and is the single biggest franchise in Games Workshop’s portfolio. Launched in 1987, it became the dominant sci-fi tabletop game, evolving into a multimedia franchise with novels, video games and licensed adaptations. Every new edition of Warhammer 40K (now on its 10th Edition) leads to significant sales spikes. Best-selling factions include: Space Marines, the most iconic and profitable miniatures. Necrons, boosted significantly by the 9th Edition launch. Tyranids, frequently drive strong sales with popular revamps. Notable box sets include Dark Imperium (8th Edition, 2017), which marked the shift to modern 40K gameplay. Indomitus (9th Edition, 2020) sold out instantly and was one of the most hyped releases in Games Workshop’s history. Leviathan (10th Edition, 2023) achieved a record-setting launch and heavily featured Space Marines vs. Tyranids.

• Age of Sigmar overcame early struggles and became a success. Warhammer Fantasy Battle was the original Warhammer game (launched in 1983), establishing the Games Workshop brand. Rebooted as Age of Sigmar in 2015 after declining interest in complex rules. This lead to initial backlash but Age of Sigmar grew into a hugely successful brand, with factions including Stormcast Eternals – The ‘Space Marines’ of AoS.

  

• Lord of the Rings - Launched in 2001 alongside Peter Jackson’s The Fellowship of the Ring. One of Games Workshop’s most successful non-Warhammer product lines, thanks to film tie-ins and mass-market appeal. While not as dominant as 40K of AoS, it maintains a strong niche community.

• Kill Team offers lower-cost entry points. A skirmish-scale version of Warhammer 40K, appealing to newer players. The cheaper entry point has made it a major success in recent years. The 2021 Kill Team: Octarius box set was a top seller.

• Horus Heresy opened a high-end niche to a broader audience. A spin-off of Warhammer 40K, set in the 30K era, focused on a Space Marine civil war. Forge World resin kits made it a niche premium product, but the plastic 2022 reboot significantly expanded its popularity. Forge World resin models and exclusive event items often carry premium pricing. This enhances the collectible nature of the products and drives up per-customer spend.

  Collecting the miniatures can become almost addictive for consumers. When customers build comprehensive armies, the evolving rules and collector culture ensures that there's always a market for new purchases.

  Even for loyal customers with complete armies, releases of new models, updated codexes, conversion kits and special editions ensures there is a reason to upgrade or expand.

  An unofficial secondary market facilitates re-selling of old sets and often supports further spending in the primary market.

Operations

Games Workshop manufactures almost all of the miniatures at its Nottingham, UK, factory. Books, paints and accessories are sourced globally. This approach balances high-quality production with cost-efficient outsourcing when necessary.

Capital is allocated to injection moulding machines for plastic miniatures, resin. Metal casting equipment is used for smaller production runs, and mould development, which is critical for producing new models.

Games Workshop operates on a lean inventory model, manufacturing based on demand and keeping limited stock in stores. This model ensures efficiency but can lead to product shortages, especially for limited-edition releases such as Leviathan for Warhammer 40K 10th Edition, which sold out within hours. Many new army launches demand can outstrip supply. Popular models are sometimes targeted by scalpers who buy in bulk and resell at higher prices, frustrating genuine fans.

Having in-house manufacturing ensures strict quality control, reduces the risk of piracy and counterfeit models, and allows for quick turnaround times on new product launches. UK-based production also helps reinforce the brand’s premium positioning, justifying higher price points.

If a miniature is completely replaced, such as when old Space Marine kits were phased out in favour of Primaris Marines, the mould is retired. Some moulds are discontinued if technological advancements render them outdated. Small production runs, especially resin models, may also be discontinued if demand is too low. Limited-edition miniatures sometimes use cheaper aluminium moulds rather than full-production steel moulds, particularly for event-exclusive models.

Games Workshop optimises costs by designing kits that share core components, such as Space Marine shoulder pads, arms, and weapons, allowing variety in designs while reducing the need for entirely new moulds. The company frequently reuses existing sprues in new boxed sets, such as Combat Patrol boxes, which contain pre-existing models repackaged with updated branding.

Instead of creating entirely new moulds, some are slightly modified, such as in The Horus Heresy range, which features Space Marines with minor tweaks from existing Warhammer 40K designs.

A high-quality steel mould can cost between £50,000 and £100,000 to design and manufacture but can produce hundreds of thousands of miniatures before degrading. While moulds cannot be directly reused for new models, they are often repurposed in creative ways to maximise efficiency and cost-effectiveness. This approach allows Games Workshop to maintain high profit margins while balancing product variety and operational sustainability.

Management

Kevin Rountree, CEO of Games Workshop, earns a basic salary of £749,000 with a £1,044,000 bonus, bringing his total annual compensation to approximately £1.87 million, with bonus tied to performance targets.

Both he and former CFO Rachel Tongue received annual 7.4% salary increases. Rountree holds 0.046% of the company’s outstanding shares. Games Workshop enforces a strict policy requiring executive directors to reinvest 67% of their 150% bonus into company shares, which must be held for at least three years.

Rachel Tongue, who stepped down as CFO at the end of 2024 after 27 years at the company, had a basic salary of £483,000 and held 0.01% of the company's shares. She was succeeded by Liz Harrison, who became Group Finance Director on the 18th September, 2024.

Games Workshop operates a Staff Profit Share Scheme, distributing a total of £18.4 million in 2023/24 (£6,000 per eligible employee), up from £11.6 million (£4,000 per employee) in 2022/23.

The company’s approach to capital allocation raises questions about its stance on share buybacks and potential acquisitions. Rountree’s equity stake ensures alignment with shareholders, but his overall ownership remains relatively small given his tenure and influence over the company’s success.

Capital Allocation

Games Workshop's increase of ROCE of 133% to 176% between 2023 to 2024 reflects strong operational performance and efficient capital utilisation.

Unlike traditional manufacturing firms, Games Workshop’s capital expenditure is relatively low. The company does not require massive R&D spending, with production facilities are already well-optimised.

Games Workshop typically pays out a large share of its post-tax profits as dividends, with some years, between 70-80% of net income.

Balance Sheet

Games Workshop operates with a conservative financial strategy, maintaining no debt and ensuring a strong balance sheet to withstand short-term setbacks. The company holds a cash buffer of £80 million, an increase from £50 million, which covers three months of working capital requirements, three months of tax payments, and any major capital expenditures or profit share payments exceeding £1 million.

Games Workshop’s dividend policy prioritizes returning "truly surplus cash" to shareholders only after maintaining this required cash buffer. This disciplined approach ensures financial stability and rewarding investors.

Bear Case 🐻

Economic Downturns -As a producer of premium hobby products, Games Workshop will face reduced consumer spending during economic downturns. However, their dedicated customer base provides some resilience. Rising costs of raw materials or labour could impact profit margins during a downturn. In-house production capabilities mitigate some external risks. Games Workshop's high operational gearing means that profits grow at a much faster rate than sales once fixed costs are covered, but this also means profits can fall significantly if sales decline.

Aging Core Audience - Long-time enthusiasts form a significant portion of the customer base. To overcome this Games Workshop is attempting to engage younger audiences through accessible starter kits and collaborations with educational institutions. By integrating digital content and maintaining active online communities, the Warhammer brand remains appealing to new generations.

Poor Management of IP - Space Marine 2 is the first example of a well received video game with Games Workshop’s IP. Prior to this, the majority of Games Workshop video games had been poorly reviewed and received but users on Metacritic.

Culture Collapse - Games Workshop aims to fosters a culture of passion and dedication, with many employees being enthusiasts themselves. This alignment with the customer base enhances product authenticity. However, a true risk is if Toxic Gatekeepers take charge of a of a single-staff stores, leading to a inhibition of new customers, leading to long term detriment.

Bull Case 🐂

Fully Unlocking IP - Licensing contributes 13.5% of Games Workshop’s profits and operates as an almost pure profit stream, though earnings can fluctuate quarter to quarter. The partnership with Amazon for a Warhammer 40,000 cinematic universe, led by Henry Cavil, represents a major opportunity to expand the brand’s reach and significantly add to the licencing revenue.

Production may take several years, potentially leaving the project in development limbo. Secret Level, a project from the creators of Love, Death & Robots, was the first exploration of the 40k universe on Amazon Prime.

Vertically Integrated Manufacturer - Games Workshop is a fully vertically integrated manufacturer, controlling every stage of the process from production to the end consumer. This model allows for tight quality control, efficient cost management, and the ability to maintain premium pricing.

Nearly all miniatures are produced in-house at the company's Nottingham facility, ensuring that product standards remain consistent while protecting its intellectual property from third-party interference.

By keeping manufacturing central, Games Workshop avoids the risks associated with outsourcing, such as quality dilution or supply chain disruptions.

Retail Chain Control - The company directly manages its global retail network, selling through both own branded stores and the online platform. This allows Games Workshop to capture a greater share of the value chain and avoids the margin erosion associate with third-party retailers.

However, while this direct-to-consumer approach strengthens brand loyalty and pricing power, it does come with challenges. Games Workshop must carefully balance growing trade relationships with independent hobby stores and large distributors that represent the largest percentage of overall sales.

Conclusion

Games Workshop is an exceptional business with equally remarkable margins, having effectively created and dominated its market without serious competition. The company operates similarly to luxury retailer, maintaining strict inventory control whilst cultivating an immersive branded world that commands high gross margins.

The partnership with Amazon presents a significant opportunity to fully capitalise on Games Workshop’s intellectual property, potentially unlocking new revenue streams and expanding brand reach beyond its core audience.

Growth remains strong, particularly in North America and Asia, with Asia offering further opportunity if approached strategically.

Unlike most traditional retailers and entertainment companies, which reinvest heavily into expansion, new IP or acquisitions, Games Workshop continues to prioritise steady growth and return cash to shareholders.

From an investment perspective, Games Workshop follows a "set and forget" model, making it attractive for long-term investors who reinvest dividends. The question remains whether the company could do more with its capital, such as share buybacks or acquisitions. However, perhaps it’s better to maintain the ‘if it's not broken don't fix it’ ethos, and carry on with what’s working.

At the current valuation, the stock appears fairly priced rather than presenting a clear buying opportunity. Any meaningful market drawdown could create a compelling investment. For now, the best approach may be to remain patient and wait for the right entry point.

Sources and Further Reading

1. https://www.edisongroup.com/research/sigmar-the-fourth/34021/

2. https://assets.ctfassets.net/ost7hseic9hc/6nhjgj1BVPlaTocG6L4IbS/e42b72a50979ca58769b9e85e04ae79a/2023-24_accounts_-_final.pdf

3. https://assets.ctfassets.net/ost7hseic9hc/1alE9DriNd0GJq1SYKn3ZY/e14d3ff03635ea919c569f075b25c60a/2024-25_half_year_report_final.pdf

$GAW Deep Dive Part 1

$GAW Deep Dive Part 2