War games are a serious business

The Investment Column

Forget the moonies and Freemasons. Fantasy war games are the cult of the Nineties - especially for all those boys out there who have never quite grown up.

Tom Kirby, chief executive and soon-to-be executive chairman of Games Workshop, is one such chap.

Founder of the highly successful games company, he shuns grown-up City clothes for jeans and T-shirts and talks excitedly about the new Gorkamorka game where green-skinned miniature monsters with long tusks do battle riding around in buggies.

Unlike conventional toy companies such as Bluebird, which struggle to keep pace with the passing whims of fickle children, Games Workshop's toys - miniature fantasy collectibles - are a serious hobby for dedicated enthusiasts.

Three-quarters of buyers are males over 12 years and, of those, a quarter are adults.

In fact, the Games Workshop business is more akin to a razor-and-blade company such as Gillette.

For every pounds 50 an average devotee spends on the basic games kit - a board, a few miniatures and a rulebook - he will spend another pounds 500 over the next two years building up the collection. What's more, the appeal seems to cross cultural barriers.

Yesterday's full-year numbers to June - profits rose 26 per cent to pounds 11m after a pounds 5m currency hit, leaving the shares 6.5p higher at 575p - showed rapid expansion in continental Europe, now more than a third of the total, particularly Germany and Spain. Business has also been growing quickly in Australia.

Japan, with its tradition of often-violent fantasy "manga" comics, should be an ideal war games market.

Meanwhile there is plenty still to do in the UK. Mr Kirby says there is room to add another 100 shops here, doubling UK capacity.

With like-for-like sales growth of more than 40 per cent, Games Workshop can certainly justify the plans.

House broker Credit Lyonnais Laing forecasts pounds 13m profits next year. On a forward PE ratio of 22 next year, falling to 18 times, the shares are still good value.

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