How Games Workshop worked its magic to join the giants of the FTSE 100

Games Workshop is officially set to battle its way into the FTSE 100 later this month for the first time in its history, cementing its place as a titan of the City.

The Warhammer maker is now the 85th biggest listed company in the UK, guaranteeing its spot in London’s main index and eclipsing household names like Easyjet, Burberry and Ocado, as its stock price surged 44 per cent throughout 2024.

Set in a dark and gritty fictional universe, the franchise’s most popular game sees orcs, ogres, wizards and elves battle against each other.

Other franchises from the company include a Lord of the Rings-based tabletop game and Necromunda, which sees humans fighting in a heavily polluted dystopian city.

Over the last decade, the value of Games Workshop’s shares have increased more than 26 times, as players buy more and more of its inch-high fantasy figures to battle each other.

“Games Workshop is a great example of a British company that has carved out a market niche and put the customer at the heart of its business,” said Dan Coatsworth, investment analyst at AJ Bell.

Games Workshop’s beginning

While the firm floated in 1994, its stock price only grew four times over in the first 18 years of its listing. Instead, true rapid growth for Games Workshop began in 2017, as the firm began experiencing rapid sales growth.

The success came following the popularity of TV shows like Stranger Things, as all tabletop games saw massive upticks in popularity, with Dungeons and Dragons first booming, followed by others like Magic the Gathering and Games Workshop’s Warhammer.

“The products it makes are good quality, it keeps a close eye on costs, and management seems more interested in running the business than spending a lot of time talking up the opportunities for investors,” added Coatsworth.

“It’s an unusual example of a listed company in that trading statements are typically short and to the point.”

Abrdn, which is one of the largest investors in Games Workshop, credited the firm’s recent stock performance to its consistently strong results.

“This success is driven by their rich intellectual property, which enhances licensing deals, and a vibrant company culture that aligns with hobbyists’ passion for the game,” said Sasha Kachanova, investment manager at Abrdn.

“Their dedication to players and responsiveness to feedback have been amongst key factors in achieving such a great reception in the market.”

Licensing

In the future FTSE 100 firm’s most recent results, it revealed year-on-year revenue growth of 17 per cent, outpacing analyst expectations.

Most significantly, licencing revenue increased by an astonishing 150 per cent year-on-year to £30m, way ahead of estimates and boosting profitability.

Games Workshop has a significant library of intellectual property that has only begun to be commercialised, from American football-based games using fantasy creatures to stories of dwarven conquest, and the market is waiting with baited breath to see what the company will do with it.

“This push into licensing is a big part of the company’s future growth strategy, with potential forged with Amazon to develop the game into films or series,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

However, this lack of monetisation from its IP has also been a benefit for the firm, preventing an oversaturation of Games Workshop media on the marketplace.

“Unlike someone such as Disney which had no shame in milking the Star Wars IP, such as putting on shows with Darth Vader dancing alongside Stormtroopers, Games Workshop is not going to let any Tom, Dick or Harry exploit its IP without sticking to the original values of what it created,” added Coatsworth.

Another core part of the business has been its in-house handling of production design, manufacturing, distribution and retail, as the firm is not forced to rely on third parties to develop, create and sell its products.

Warhammer was the first game in the business to use its own proprietary models as part of the game, rather than using general models that can be bought from any manufacturer, and its profit margins have soared as a result.

Warhammer and the community

Coatsworth also noted that Games Workshop had “used its stores to foster a community spirit which differentiates it from mainstream retail”.

“People can go into its stores and play games, with no pressure to buy anything,” he said.

While the company has endured some controversy, such as a 2021 row over allowing creative works based on Games Workshop intellectual properties, it has still maintained a strong relationship with its community.

“Staff are knowledgeable and as passionate about the subject matter as customers, making the stores a vibrant place. Naturally, that increases engagement and ultimately leads to greater sales,” added Coatsworth.

Players will appreciate just how much can turn on the roll of the dice in Warhammer, but investors who joined the action just a few years ago now find themselves in a winning position.