Investment column: Games Workshop shares fall to earth

GAMES Workshop, the Nottingham-based company had until yesterday enjoyed a meteoric rise on the back of its fantasy games based on figures like Space Wolves and Orcs.

From the group's flotation in late 1994, the shares had risen from an initial low of 106p to a high of 857.5p. Yesterday the sky fell in, with a profits warning caused by the strong pound, temporary stock problems and disruption caused by a move to new premises.

The shares plunged 225p to 632.5p, wiping pounds 70m off the market capitalisation. The fall comes six months after the chairman, Tom Kirby, sold 200,000 shares at 705p. Profits in the year to May are likely to be below market expectations of around pounds 13m.

Games Workshop has done well in the past to keep going in the face of teenage tastes and the company maintains computer games are a separate market to its own where customers buy and assemble model armies of fantasy figures.

But analysts say the company is also paying the price for over-pricing its latest models and have cut forecasts by around 10 per cent to around pounds 11.5m this year and pounds 14.2m next. That brings the shares back down to a slightly more realistic multiple of 26, falling to 21. Crucially, sales in the US are still strong and new games are coming on stream. The shares, though hardly cheap, may be worth a gamble at this price.