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How Warhammer won battle of 'hobby stocks' for Games Workshop

The Warhammer game of table-top battle and strategy was originally devised in the late 1970s.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

Late on a Saturday afternoon, shoppers in Southend are starting to drift home. But in a shop tucked down the side of the town’s Victoria shopping centre, an existential battle is raging.

Peter Sippitt and his son Harry are sitting either side of a table, marshalling opposing armies using a dice, a tape measure and the rule book for Warhammer, a fantasy board game.

“I played when I was younger and Harry has been playing since he was six or seven. His understanding of the game is now greater than mine,” said Mr Sippitt. “It’s not much fun losing to a 10-year-old,” he added ruefully.

They come to the store, operated by Warhammer owner Games Workshop, most Saturdays. In a few weeks they will be heading up to Nottingham to visit Warhammer World, a fantasy campus where fans take each other on in games such as Aeronautica Imperials or Blackstone Fortress.

The Warhammer game of table-top battle and strategy was originally devised in the late 1970s. Unlike Dungeons and Dragons, which is purely about role-playing, it involves collecting and painting characters such as Chaos Daemons and Black Templars, which make up the opposing forces of Chaos and the Imperium of Mankind.

While shares in other UK “hobby stocks” such as philatelist Stanley Gibbons and model railway maker Hornby have struggled, Games Workshop has prospered.

The company’s market value at almost £1.5bn exceeds well-known names such as electricals retailer Dixons Carphone after shares soared 19 per cent last Friday.

The surge in shares last week — they have risen more than 700 per cent over the past three years — followed the group’s announcement that half-year profit would be 34 per cent higher than last year. Profits have gone from £12.4m in 2014 to £81m in the year to June 2019.

Charles Hall at Peel Hunt, one of only two analysts who follows the company, said the recent gains were largely the result of initiatives taken by Kevin Rountree, who was appointed chief executive in 2015.

These included widening its use of social media, simplifying some of the rules and widening its range of price points, making cheaper and simpler games available. “It has become much easier for people to get involved,” said Mr Hall.

Although it has more than 500 shops worldwide, Games Workshop does not regard itself as a retailer. Stores are a means to an end; a place to recruit and engage hobbyists, rather than just sell things.

The walls of the Southend outlet — and its Facebook page — detail the various events that take place there during the week: after-school club on Wednesday, veterans late-night gaming on Friday, Weekend Warlords on Saturday.

Ian Livingstone, one of the founders of Games Workshop and a partner at gaming-focused private equity group Hiro, said the company always made a point of having highly engaged staff.

“We didn’t hire ordinary retail people who’d worked at Sainsbury’s or Marks and Spencer. We hired other people like us. We were hobbyists and games players ourselves.”

The company’s relentless focus on the hobby partly accounts for its low public profile. Staff in the store were happy to talk in detail about the games and the characters, but questions about business performance were directed to head office, where a request for an interview was politely declined.

The location and timing of the group’s annual meeting in September highlighted the group’s relaxed approach to its shareholders. Held in Nottingham at 10am, it made attendance inconvenient for City-based investors. Yet, pleas to change to a later time to make it easier to travel from London fell on deaf ears.

“They don’t court the buy side [investors],” said Simon Young, fund manager at Axa Framlington. But he praised management’s long-term vision, plain use of language and disciplined capital allocation. “For an income investor like me, their pledge to return all surplus capital is very attractive.”

But while it disdains publicity, Games Workshop has made great efforts to attract younger hobbyists. It has signed up more than 2,000 UK schools to the Warhammer Alliance. This provides everything needed to get 12 students at each school started.

Painting the intricate miniatures counts towards model-making badges for Scouts, while playing the Warhammer game satisfies the skills requirements of the Duke of Edinburgh Award, a character-building programme for young people.

Its nascent media business may also increase its reach with younger players. It has long received royalties from computer game developers, but is now working on other ways to monetise what it calls the “grimdark” of its intellectual property, including animation and a potential television series.

“If you go to games conventions, the players seem to be getting younger, not older,” noted Mr Livingstone, who attributes the games’ enduring appeal to a basic love of soldiers and battle. “Children, and especially boys, have always loved toy soldiers. This is just toy soldiers in a fantasy realm.”

Mr Sippitt said that playing the game had improved his son’s ability to solve problems and concentrate, and had reduced the time he spent on electronic devices.

Harry plays computer games too. “But if I had to choose between them, I’d choose Warhammer,” he said. Few of his school friends play, but he has another social circle around the hobby. “People dread having to play against me,” he said, clearly pleased at his status as a warlord to be feared.


This article was written by Jonathan Eley from The Financial Times and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

Article originally published by The Financial Times. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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