Tabletop games specialist Games Workshop has unveiled a trading update in which the company warns that results for the year to May 2011 will be ‘below current market expectations.’ The shares lost 12% following the announcement, falling 50p to 372.5p.
The Nottingham-headquartered company said that sales for the first half to 28 November were down 4%, adding that ‘difficult trading conditions’ since then mean that this shortfall is ‘unlikely’ to be recovered by the year-end. In addition it warns that royalties receivable in the current year are ‘not as significant as in the year to May 2010.’
Following the update, house broker Peel Hunt slashed its forecasts, reducing its profit expectations from £17 million to £12 million in 2011, and from £18 million to £15 million in 2012. In addition it has downgraded its EPS forecasts 29.5% for 2011, from 37.6p to 26.5p and from 40.5p to 33.7p for the following year.
Recommended by Growth Company Investor last August at 420p, the failure to reach forecasts is a cause for concern, however we would advise waiting until interim results due on 25 January for further clarification on the outlook.
It looks like my estimate of 30p in perpetuity is still valid, so I think things are not as bad as they look.