Games Workshop seeks new markets

GAMES WORKSHOP, the war games company that shocked the market with a profits warning last May, is aiming its battalions at overseas markets in the hope of making up for sluggish growth in the UK.

The company has launched a game called Warhammer Fantasy Battle for the Japanese market, while also pushing ahead with store openings in the US. However, the group disappointed the City again with half- year figures below expectations.

Pre-tax profits were 8 per cent up at pounds 5.2m, forcing analysts to reduce forecasts. The news pushed the shares down 47.5p to 397.5p, compared with their high of 857p last spring.

Games Workshop's speciality is toy soldier board games, which aficionados spend hours playing using the manufacturer's guide books. It manufactures the games and sells them through its own network of almost 200 stores as well as through independent retailers.

Last year it came a cropper due to the strong pound, an ill- advised price increase and poor stock control. This year it claims to have put matters right under Chris Prentice, who succeeded founder Tom Kirkby as chief executive last year.

He is trying to move the business from its entrepreneurial origins to a more solid, professional approach. New management systems are being introduced to a company that now has half of its stores overseas.

Tim Steer of Merrill Lynch said: "The key to the company's success lies in whether it can manage this transition successfully while expanding on an international front. I think it probably can."

Underlying sales were up by 11 per cent in the half year. This has slowed a little since the end of the half year in November but is still well into positive territory. The group's own stores are doing well although sales through independent toy and hobby stores have been weaker.

On Merrill Lynch's reduced full-year forecasts of pounds 12.5m, the shares trade on a forward multiple of 15. Not hugely expensive for a former glamour stock, but not without risks either.