Warhammer Maker is One of the Best U.K. Bets Since Brexit Vote

(Bloomberg) -- Investors in the U.K.’s best equity return since the Brexit vote have overseas fans of goblins, elves and orks to thank.

Shares of Games Workshop Group Plc, maker of the Warhammer series of table-top games, have gained just under 1,000% since the U.K. voted to leave the European Union on June 23, 2016. The second-biggest riser in the FTSE All-Share Index in the period, iron ore company Ferrexpo Plc, trails by a wide margin with a 737% gain.

Nottingham, England-based Games Workshop makes miniature fantasy figures that customers buy, paint and then use in strategy games with other collectors. It sells the figures -- along with paints, game accessories and accompanying handbooks -- online and in brick-and-mortar stores. It has also licensed the Warhammer name for video games and runs a Warhammer cafe in Grapevine, Texas where customers meet up and play.

The stock, which is covered by just two analysts, has benefited from Brexit-related currency moves. Games Workshop gets nearly two-thirds of its revenue from outside the U.K., so the pound’s weakness since the vote has made its miniature models cheaper for overseas customers. It has also created a positive currency translation effect in its financial results. Overall, revenue has more than doubled since its 2016 fiscal year.

Still, the currency impact isn’t the full story to explain the stratospheric rise of the shares in the past three years, as the pound has steadied in the past two. The retailer has embraced the Internet with the Warhammer Community and is making efforts to attract a new generation of teenage players by setting up after-school Warhammer clubs, according to Peel Hunt analyst Charles Hall. The company didn’t respond to requests for comment.

“This is a company that previously sort of tolerated online and, from 2017, they’ve embraced online,” Hall said in an interview. It engages with players and responds to criticism by tweaking narratives and strategy in the games, while the Warhammer Community includes in-depth discussions on storylines and showcases the collections of its fans. The company has also tweaked its pricing strategy to attract new players rather than exclusively aficionados.

Despite a surging share price which propelled the company into the U.K.’s FTSE 250 index last year, Games Workshop keeps a low profile with the financial community. Chief Executive Officer Kevin Rountree doesn’t give interviews and, of the two analysts covering the stock, Peel Hunt is the firm’s house broker, while Edison Investment Research is commissioned by the companies it covers. The median number of analysts for a company on the U.K. midcap benchmark, excluding funds and trusts, is ten, according to data compiled by Bloomberg.

Games Workshop has no debt and its only equity action came last year when former chairman Tom Kirby offloaded 20 million pounds worth of shares. Taken together, one might question why it wants to be a public company.

Still, the company’s reticence to engage doesn’t seem to be putting off investors. Shares are up 62% this year, building on their three-year run, and also putting it in the top five FTSE 250 performers in 2019. And the popularity of its games may continue as it attracts more adult Warhammer fans who played the fantasy games as teenagers in the 1990s and early 2000s, according to Hall.

“Some of them will have dropped it for a bit because they’ll have gone and found something more exciting to do,” Hall said. “But a lot of them come back because they just go: ‘I love this whole genre’.”

To contact the reporters on this story: Joe Easton in London at jeaston7@bloomberg.net;Sam Unsted in London at sunsted@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis

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